This is the second in a three-part series of blog posts on “no contest” clauses. In this post, I’ll discuss some of the key points in the recent Virginia Supreme Court ruling (777 S.E.2d 870) in the Rafalko case relating to no contest clauses. In part three, I’ll discuss some of the key points in the dissenting opinions.
In Rafalko, the Virginia Supreme Court confronted the issue of whether certain actions violated a trust’s no contest clause. The facts and procedural history of the case are lengthy and detailed, so in my discussion below I’ve only highlighted some of the essential facts. Here are the key takeaways from the 4-3 majority opinion.
First, the Virginia Supreme Court held that discourse relating to a challenge of a trust containing a no contest clause does not trigger the no contest clause itself. In the Rafalko case, one of the two party-plaintiffs (trust beneficiaries who filed a declaratory judgment action) wrote a letter to the trustee stating that the deceased’s estate planning documents “will be the subject of a contest” and asking the trustee to terminate the trust pursuant to a nonjudicial settlement agreement whereby the plaintiffs would receive immediate distributions (compared to distributions only after the income beneficiary passed away). One of the party-plaintiffs also wrote to the attorney who drafted the trust, asking him to preserve documents relating to the deceased’s estate plan in anticipation of a legal challenge. The trustee claimed that such conduct triggered the trust’s no contest clause, which prohibited any beneficiary from “directly or indirectly . . . challenging[ing] or contest[ing] this trust agreement or any of its provisions, or . . . in any...
