Does a Demand For Information Trigger a Trust’s No Contest Clause?

 

One of the biggest confusions among trustees and beneficiaries is the true scope of a no contest clause. Regardless of the wording of a no contest clause, it cannot be triggered by a beneficiary taking actions such as asking for information, demanding an accounting, objecting to an accounting, or challenging an action taken by a trustee. Put another way, even if the no contest clause says it can be triggered by such actions, that aspect of the no contest clause is void (per law) as against public policy.

If you are a trustee, you need to understand that you cannot use the existence of a no contest clause to deny information to beneficiaries to whom you owe duties or as a “defense” when a beneficiary seeks to challenge an action you have taken. You should be transparent in your actions as trustee, provide information to your beneficiaries, and keep detailed trust records. Beneficiaries have the right to review and challenge your actions.

If you are a beneficiary, you should understand that you have the right to receive certain trust information and to question the actions of the trustee about how they are managing the trust. A no contest clause cannot be triggered by you asking about things such as the management, investment, distributions, income, and agents of the trust. A no contest clause is also not triggered by the filing of actions in court to compel the trustee to provide a beneficiary with information or an accounting or challenging actions taken by the trustee.

The above discussion is not meant to convey the message that no contest clauses should be ignored. To the contrary, no contest clauses can have a sting to them, the breadth of which depends greatly on the year in which the trust instrument became irrevocable and the wording of the clause. (See the Article entitled How Does a No Contest Clause Work?)