Nevada § 163.00195 - Enforcement of no-contest clauses; exceptions

§ 163.00195. Enforcement of no-contest clauses; exceptions

1. Except as otherwise provided in subsection 4, a no-contest clause in a trust must

be enforced, to the greatest extent possible, by the court according to the terms

expressly stated in the no-contest clause without regard to the presence or absence

of probable cause for, or the good faith or bad faith of the beneficiary in, taking

the action prohibited by the no-contest clause. A no-contest clause in a trust must be enforced by the court because public policy

favors enforcing the intent of the settlor. 2. No extrinsic evidence is admissible to establish the settlor's intent concerning

the no-contest clause to the extent such intent is clear and unambiguous. The provisions of this subsection do not prohibit extrinsic evidence from being

admitted for any other purpose authorized by law. 3. Except as otherwise provided in subsection 4, a beneficiary's share may be reduced

or eliminated under a no-contest clause based upon conduct that is set forth by the

settlor in the trust. Such conduct may include, without limitation: (a) Conduct other than formal court action; and (b) Conduct which is unrelated to the trust itself, including, without limitation: (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. 4. Notwithstanding any provision to the contrary in the trust, a no-contest clause

in a trust must not be enforced by a court and a beneficiary's share must not be reduced

or eliminated under a no-contest clause in a trust because: (a) A beneficiary acts to: (1) Enforce the clear and unambiguous terms of the trust, a transfer of property into

the trust, any document referenced in or affected by the trust, or any other trust-related

instrument; (2) Enforce the legal rights of the beneficiary that provide the beneficiary standing

as related to: (I) The trust; (II) A transfer of property into the trust; (III) Any document referenced in or affected by the trust; or (IV) Any other trust-related instrument; (3) Obtain court instruction with respect to the proper administration of the trust

or the construction or legal effect of the trust, a transfer of property into the

trust, any document referenced in or affected by the trust, or any other trust-related

instrument; or (4) Enforce the fiduciary duties of the trustee. (b) The court determines by clear and convincing evidence that the conduct of the

beneficiary was: (1) A product of coercion or undue influence; or (2) Caused by the lack of sufficient mental capacity to knowingly engage in the conduct. (c) A beneficiary acts as a trustee or a protector of the trust to exercise a power

set forth in the trust, including, without limitation: (1) Reforming, modifying or decanting the trust; (2) Removing or replacing a trustee; (3) Making or withholding distributions from the trust; or (4) Exercising any other discretionary power. (d) A beneficiary or any other interested person enters into an agreement to settle

a dispute or resolve any other matter relating to the trust. (e) A beneficiary institutes legal action seeking to invalidate a trust, the transfer

of property into a trust, any document referenced in or affected by the trust, or

any other trust-related instrument if the legal action is instituted and maintained

in good faith and based on probable cause. For the purposes of this paragraph, legal action is based on probable cause where,

based upon the facts and circumstances available to the beneficiary who commences

such legal action, a reasonable person, properly informed and advised, would conclude

that the trust, the transfer of property into the trust, any document referenced in

or affected by the trust or any other trust-related instrument is invalid. (f) Unless the trust expressly provides otherwise, a settlor is also a beneficiary

of the trust. 5. Where a beneficiary takes action, asserts a cause of action or asserts a request

for relief and such action or assertion violates a no-contest clause in a trust, this

section must not prevent the enforcement of the no-contest clause unless the action,

cause of action or request for relief claims one of the exceptions to enforcement

set forth in subsection 4. 6. Except as otherwise provided in subsection 4, subject to the discretion of the

trustee: (a) A trustee may suspend distributions to a beneficiary to the extent that, under

a no-contest provision, the conduct of the beneficiary may cause the reduction or

elimination of the interest of the beneficiary in the trust. (b) Until a court determines whether the interest of the beneficiary in the trust

has been reduced or eliminated, a trustee may: (1) Resume distributions that were suspended pursuant to paragraph (a) at any time;

or (2) Continue to suspend those distributions. (c) To the extent that a beneficiary has received distributions before engaging in

conduct that potentially would have caused the reduction or elimination of the interest

of the beneficiary in the trust under a no-contest clause, a trustee may seek reimbursement

from the beneficiary or may offset those distributions. 7. A no-contest clause applies to an amendment to the trust or trust-related document

even if the no-contest clause was not expressly incorporated in such an amendment. 8. As used in this section: (a) “ No-contest clause ” means one or more provisions in a trust that express a directive to reduce or eliminate

the share allocated to a beneficiary or to reduce or eliminate the distributions to

be made to a beneficiary if the beneficiary takes action to frustrate or defeat the

settlor's intent as expressed in the trust or in a trust-related instrument. The term does not include: (1) Provisions in a trust that shift or apportion attorney's fees and costs incurred

by the trust against the share allocated to a beneficiary who has asserted an unsuccessful

claim, defense or objection; (2) Provisions in a trust that permit a trustee to delay distributions to a beneficiary; (3) Provisions in a trust that require the arbitration of disputes involving the trust; (4) A forum selection clause in the trust; or (5) Provisions in a trust that make a devise conditional or specify conditions or

actions pursuant to NRS 163.558 . (b) “ Trust ” means the original trust instrument and each amendment made pursuant to the terms

of the original trust instrument. (c) “ Trust-related instrument ” means any document purporting to transfer property to or from the trust or any document

made pursuant to the terms of the trust purporting to direct the distribution of trust

assets or to affect the management of trust assets, including, without limitation,

documents that attempt to exercise a power of appointment.