How to Successfully Challenge Handwritten Trust Changes Without Triggering a No Contest Clause
A good trust can be the centerpiece of a strong estate plan. The wide range of trust types offers a solution for almost every estate planning need. The increasingly prolific use of trusts has caused a corresponding rise in conflict between trustees and trust beneficiaries. Given that trusts often include no contest clauses, trustees and beneficiaries alike must navigate the sticky issue of seeking a legal ruling on the legitimacy of a trust provision without triggering the no contest clause and being disqualified as a beneficiary.
No contest clauses are trust provisions that threaten to void distributions to anyone who challenges the trust in court. There is a significant public interest in favor of no contest clauses: they reduce frivolous litigation and encourage interested parties to honor the intent of the settlor as expressed in the trust. At the same time, no contest clauses can have a chilling effect on beneficiaries who believe that there is a legitimate legal problem with a trust and have a good-faith desire to correct that problem through the courts. Undue influence, fraud, incapacity, and other issues can all give rise to legitimate trust contests that serve the interests of justice.
Trust amendments are often the basis for a trust contest. Typically, a contestant is a trust beneficiary whose interest was reduced by the amendment. The beneficiary wants to revert to the original trust terms that are more favorable to him or her, but a no contest clause appears to stand in the way of a potential challenge.
No contest clauses are often upheld by the court as valid, but one situation in which they do not apply is the case of handwritten additions – called interlineations – to the body of the trust itself. Interlineations, commonly referred to as chickenscratch, are arguably the worst way to update a trust, but if the handwritten notes conform to the applicable legal requirements, they are technically valid and may effectively change the terms of the trust.
Contesting interlineations does not trigger or violate a trust’s no contest clause because the interlineations are technically considered a separate instrument, and “a challenge to an instrument other than the instrument containing the no contest clause is not a contest under Probate Code section 21305, subdivision (a)(3).” (Cory v. Toscano (2009) 174 Cal.App.4th 1039, 1041 (“Cory v. Toscano”).)
In Cory v. Toscano, the court considered a situation in which the settlor created a revocable living trust with a no contest clause that disinherited any beneficiary who “contests in any court the validity of this trust . . . or seeks to obtain an adjudication in any proceeding in any court that this trust or any of its provisions . . . is void, or seeks otherwise to void, nullify, or set aside this trust or any of its provisions.”
The trust in Cory v. Toscano contained a distribution to Cory that gave him the net proceeds from the sale of a piece of real estate. Sometime after executing the trust, the settlor handwrote a note on the actual trust document changing Cory’s distribution to “25%” of the net proceeds of the sale of the property. The settlor signed and dated the interlineation.
Cory contested the interlineations, claiming that they were invalid. The trustee responded by raising the no contest clause and arguing that Cory should be disinherited according to the terms of the no contest clause in the trust. The court held that the interlineations were not subject to the no contest clause contained within the main trust, as the interlineations were a separate instrument, and the no contest clause was only effective with regard to a contest brought against the original trust document.
The Cory v. Toscano ruling favors beneficiaries by preserving their right to petition the court regarding a trust. However, when bringing any trust contest it is important to avoid triggering a no contest clause and becoming disinherited. Trust interlineations may or may not be legally binding, but either way, contesting them should be done by an experienced trust litigation attorney.
For trust settlors, it should be noted that interlineations usually create more issues than they fix. Changes to a trust should be made by a competent trust and estate attorney, not by scribbling alternative provisions onto the original trust document or crossing out outdated provisions. If you are considering changing a trust, or have questions about a no contest clause and whether or not it will prevent you from challenging a trust, contact us for a consultation. We will review your legal options with you and build a strategy to achieve your needs.