Henderson Office: 702.433.4455
Las Vegas Office: 702.254.4455
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No Contest Clauses

Law Firm of Jeffrey Burr

A no contest clause is a provision in an estate planning document that states that if a beneficiary challenges the legality of the estate planning document (or any part of it) then such a beneficiary will lose his or her share.  A no contest clause is intended to discourage beneficiaries from initiating frivolous lawsuits.

We are asked about no contest clauses in two situations, (1) when a client is concerned that a problematic family member may cause trouble after his or her death, or (2) when a client who is a beneficiary of a will or trust is concerned about how the trustee or executor is managing the trust or estate and is concerned that they will lose their inheritance if they complain or file petitions in court.

The general rule is that a court must enforce a no contest clause, except for specific circumstances.  There are statutory exceptions to the enforcement of a no contest clause.  A no-contest clause will not be enforced if the beneficiary is asking the court to construe the terms of the trust or enforce the beneficiary’s rights under the trust.  In addition, a no contest clause will not be enforced if a beneficiary is seeking a court ruling seeking the construction or legal effect of the trust.

There is one additional statutory exception to the enforcement of a no-contest clause.  A no-contest clause will not enforced if a beneficiary seeks to set aside the trust and the action is instituted in good faith and based on probable cause that would have led a reasonable person, properly informed and advised, to conclude that the trust is invalid. This is a fact intensive test and there will need to be sufficient evidence to demonstrate that there was probable cause.  For example, probable cause may be found if a trust was amended to disinherit a child immediately before the settlor’s death and the settlor was taking a significant amount of pain medication.

In the last legislative session, the Nevada legislature strengthened no contest clauses.  The type of beneficiary conduct that can trigger a reduction or elimination of a beneficiary’s share has been greatly expanded.  A settlor (the person establishing the trust) can set forth specific conduct in the trust document.  Under Nevada law, a share can be eliminated for conduct other than formal court action and conduct that is unrelated to the trust itself.  The statute sets forth the following examples of such non-trust related conduct:

  1. The commencement of civil litigation against the settlor’s probate estate or family members;
  2. Interference with the administration of another trust or a business entity;
  3. Efforts to frustrate the intent of the settlor’s power of attorney; and
  4. Efforts to frustrate the designation of beneficiaries related to a nonprobate transfer by the settlor.

This statute has not been tested in the courts and it is unclear how broad the scope of the non-trust related conduct may be for the no contest clause to be upheld.  We believe that this question may result in more litigation regarding no contest clauses.

In conclusion, in the estate planning contest we recommend that you have a no contest clause.  While there are some instances where they may not be upheld, they are a good deterrent for litigation.  In the litigation and trust administration context, it depends upon the specific facts of the case.  It is best that you meet with us to evaluate the proper steps to protect yourself from the effect of a no contest clause.

Attorney Richard T. Cunningham

Henderson Office
2600 Paseo Verde Parkway, Suite 200
Henderson, NV 89074
Phone: 702.433.4455
Fax: 702.451.1853
Las Vegas Office
10000 W. Charleston Blvd., Suite 100
Las Vegas, NV 89135
Phone: 702.254.4455
Fax: 702.254.3330
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