The Georgia court advance sheets recently included Slosberg v. Giller et al., No. S21G1226, Georgia Supreme Court (June 30, 2022) dealing with a no-contest clause in an irrevocable trust. The point of this blog post is that “no-contest clauses” in Georgia are still in a state of uncertain flux. Judicial opinions like this Slosberg case are part of the slow evolution of the body of law in Georgia for the design and use of these clauses.
In Slosberg a settlor created an irrevocable trust that, upon his death, left the bulk of the trust to his two daughters, and only a nominal amount to his son. The trust included a no-contest clause providing that any beneficiary who contested the validity of the trust would lose all benefits under the trust.
The son filed a lawsuit alleging his two sisters unduly influenced their father as to the creation and provisions of the trust document. After some head-spinning motion for summary judgment and jury trial activity in the trial court, a jury ultimately found undue influence existed with a result that the trial court ruled the trust was void.
But, the case then went up on appeal, and the Georgia Court of Appeals declared that the son nonetheless violated the no-contest clause by initiating the litigation, even though the jury found undue influence. See Giller v. Slosberg, 359 Ga. App. 867, 858 S.E.2d 747 (2021).
The Georgia Supreme Court reversed and held that a no-contest clause does not bar a beneficiary from asserting a claim for undue influence, referring to the longstanding Georgia common law rule that the valid formation of a trust may be challenged.
But, now here is the kicker. The Supreme Court went on to state that if an undue influence challenge fails, the challenging beneficiary is then deemed to have triggered against himself or herself the no-contest clause in the trust. A potentially quite costly Pyrrhic victory.
Here is my take. For years I have (and still do) complain that Georgia does not have a “probable cause” exception to filing challenges to a Will or trust that potentially might trigger a no-contest clause. See, for example, Duncan v. Rawls, 345 Ga. App. 345, 812 S.E.2d 647 (2018)(no good faith/probable cause exception exists under O.C.G.A. Section 53-12-22 [trust no-contest clauses]).
A probable cause exception could enable a claimant to challenge the validity of a trust document, but even if the challenger loses would not trigger the no-contest clause as long as the challenger had sufficient probable cause. There will remain a risk for a losing challenger; but a probable cause exception broadens the opportunity for potentially necessary challenges in some cases.
For example, a test case I wait for is a situation where a lawyer, or other close financial advisor with a confidential relationship to the settlor, himself or herself becomes a beneficiary in a trust, or in some other financially beneficial manner, etc., by potentially having unduly influenced the trust settlor.
Under current Georgia law without a probable cause exception, another beneficiary challenging the lawyer’s (or other advisor’s) potential undue influence may well be a risk the beneficiary simply cannot take. Or, more importantly, cannot afford to lose.
By contrast, if Georgia did have a probable cause exception, I would argue that any lawyer, or other advisor, who has placed himself or herself in a financially beneficial position within a client’s trust document — on its face — provides probable cause reasonably warranting a protected no-contest clause challenge.
Email me and I can send you copies of both this Slosberg opinion, and the Duncan opinion. firstname.lastname@example.org