SEPTEMBER 14, 1998 VOLUME 6, NUMBER 11
James Ferber knew something about probate proceedings. The California man had been personal representative for his father's estate, and did not have positive feelings about the proceeding. Due to several family quarrels (and one lawsuit filed against James over his handling of the probate), the estate was open for 17 years. He resolved that his own estate would not be such a legal morass, and he took steps to prevent a repeat of his earlier experience.
In 1987, Mr. Ferber discussed his estate plan with his attorney. He instructed the lawyer to include a "no contest" clause which would disinherit anyone who brought any action against the estate or his personal representative. In fact, he instructed the lawyer, the no contest provision should be as broad as possible. The result, signed in March of 1987, was a 225-word sentence designed to disinherit anyone who contested the will, any action of the personal representative, or almost any aspect of the estate administration. He named his brother Richard as personal representative.
Mr. Ferber died just four months after signing his will. He left an estate of about $4.6 million, with most going to family members. The only non-family member to receive any funds was Richard's friend Sandra Plumleigh; she was left $250,000.
In September, 1987, Richard Ferber introduced his brother's will to probate court in California and began administration of the estate. It was not until almost eight years later that Sandra Plumleigh decided she might have to take some action to force resolution of the estate. She wanted to seek Richard Ferber's removal as personal representative, object to his accounting (filed a year later), and seek review of his handling of jointly-owned property.
No contest clauses like James Ferber's (lawyers usually refer to such provisions by their Latin name, in terrorem clauses) create a dilemma for devisees. Knowing they might be disinherited if they file any legal proceedings, they nonetheless have an interest in efficient administration of the estate and proper resolution of conflicts.
California law permits devisees like Ms. Plumleigh to file a special kind of lawsuit, effectively seeking an advance determination of whether the in terrorem clause will be invoked by filing a petition in the probate proceeding. Ms. Plumleigh took advantage of that procedure. She argued that preventing her from challenging the administration of the estate would be against public policy, and that there was a solid basis for her objections. The court gave its blessing for her to file her petition.
The California Court of Appeals partially agreed. Richard Ferber had argued that there was no need to permit Ms. Plumleigh's objections to his accounting, since the probate court itself could oversee his administration of the estate. The appellate judges pointed out, however, that probate courts "lack the resources to scrutinize every matter for executor malfeasance. They must rely on beneficiaries to be aware of the facts and raise cogent points." So long as Ms. Plumleigh's attempt to remove Richard Ferber as personal representative was not "frivolous," the judges would permit her to file.
Ms. Plumleigh's other requests received mixed results. Although she was permitted to object to Richard Ferber's accounting, the judges did not pre-approve her request to challenge the characterization of jointly-owned property. Meanwhile, no one seemed to notice the irony of James Ferber's "no contest" clause resulting in an 11-year probate and one trip to the Court of Appeals.Estate of Ferber, August 24, 1998.
The Ferber case might have turned out differently under Arizona law. The probate code in Arizona simply provides that a no contest provision "is unenforceable if probable cause exists" for an action to challenge the will or the personal representative.