SD House Bill 1045 | NNA
Law

SD House Bill 1045

Notary Law Update: SD House Bill 1045

State: South Dakota

Summary:

House Bill 1045 defines a “no contest clause” in a trust document and provides that a no contest clause is enforceable against a beneficiary contesting the trust settlor’s signature when the challenge does not in any way constitute good, probable or reasonable cause, provided the settlor’s signature was either witnessed by nonrelative witnesses or a nonrelative Notary, or both.

Signed:  March 02, 2012

Effective:  July 01, 2012

Chapter: 233

Affects:

Adds new but as yet uncodified sections to Chapter 55-1 of the South Dakota Codifed Laws

Changes:
  1. Defines a “no contest” clause to mean a clause in a trust that penalizes a qualified beneficiary for contesting a trust or instituting other proceedings at law or equity relating to the trust estate, excluding proceedings related to trust administration.
  2. Clarifies that a no contest clause is enforceable against a beneficiary who elects to contest or challenge the settlor’s signature and such challenge does not in any manner constitute good, probable or reasonable cause, provided the settlor’s signature was witnessed by nonrelative witnesses or a duly qualified nonrelative Notary Public or both.
Analysis:

House Bill 1045 is an interesting bill that demonstrates the value of having a signature on a trust document notarized. In trusts and other estate planning documents, a “no contest clause” is often incorporated to prevent a beneficiary from seeking to void any provision of a testamentary document. Why would someone use a “no contest clause”? A person creating a trust or a will may anticipate that a beneficiary will be unhappy with the property distributed to him or her and that the beneficiary may attempt to tie up the estate in litigation until a favorable settlement is reached. Should the beneficiary attempt to challenge the validity of the trust or will, enforcement of the no contest clause would result in a complete and total disinheritance of the beneficiary. Thus, the person who created the trust can rest in peace knowing that his or her final wishes will not be thwarted by a beneficiary trying to get more than what was gifted to him or her. HB 1045 states that a no contest clause is enforceable against a beneficiary who contests the trust settlor’s signature when the challenge does not constitute good, probable or reasonable cause, provided the settlor’s signature was witnessed by nonrelative witnesses or a duly qualified nonrelative Notary Public or both. The point is that if a duly qualified nonrelative Notary witnessed the signature, there is a presumption that the signature was made voluntarily and without threat, coercion or duress, and with full understanding of the effect of the transaction. The bill also states that probable cause for contesting a trust would be fraud, duress, revocation, lack of contractual capacity, undue influence, mistake, forgery or irregularity in the execution of the trust document. A proper notarization would defend against many of these legitimate grounds for challenging the trust.

Read the bill text.

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