Bill Targets ‘No Contest’ Estate Ploy : Law: In wills leaving substantial sums to lawyers preparing them, provisions impeding legal challenge by heirs would be forbidden.

Assemblyman Tom Umberg has proposed legislation prohibiting lawyers who prepare wills bequeathing them substantial sums of money from inserting “no-contest” clauses that deprive other heirs of their inheritances if the wills are challenged in court.

On the Assembly’s opening day this week, Umberg (D-Garden Grove) introduced a bill banning the use of “no-contest” provisions if a bequest to the lawyer exceeds $500 or 5% of the total estate. His action came in the wake of a Nov. 22 report in The Times detailing how Laguna Hills lawyer James D. Gunderson prepared wills and trusts giving himself millions in real estate, cash and stocks from the estates of his Leisure World clients.

In one recent case, Gunderson arranged to have a client bequeath him stock valued at $3.5 million and included a “no-contest” provision in the will to deprive any other beneficiary of a share of the man’s $18-million estate if he or she mounted a legal challenge. The 98-year-old client, who was blind and bedridden, signed the will only six weeks before his death.

Umberg’s bill would prohibit anyone who drafted a will--and stood to inherit more than $500 or 5% of the estate--from using a no-contest clause to inhibit challenges by relatives or other disgruntled beneficiaries. The prohibition would not apply if the individual drafting the will were an immediate family member.

The assemblyman made the bill the first piece of legislation he introduced after Monday’s ceremonial swearing-in of the new Legislature. He said the legislation is little more than a “stopgap measure,” but suggested that it could become more ambitious after he consults with State Bar of California officials on ways to keep attorneys from breaching ethical standards of conduct.

“This is legislative first aid,” said Umberg, who introduced the bill as an urgent measure, meaning it would go into effect immediately upon being signed by the governor. “There are some other remedies I’m willing to consider, but I don’t want to speculate on what we might do beyond this.”

An official with the State Bar, which is conducting an investigation of Gunderson’s activities, said he welcomes a chance to work with Umberg on the legislation, although he suspects that the intent of the assemblyman’s new bill has already been met by existing law.

“I’m not sure that it adds anything,” said James R. Birnberg, a Los Angeles attorney and legislation committee chairman for the State Bar’s probate section. “But we’re on the same wavelength as Tom Umberg. We’re willing to work with him.”

Birnberg said the legal community is eager to avoid even the appearance of improper behavior in drawing wills for elderly clients.

“We don’t like the idea of being considered soft in this area,” he said. “My attitude would be we don’t want lawyers even giving the impression of impropriety. And we certainly don’t want any client taken advantage of.”

Birnberg said he hopes to see the adoption of rules of conduct that prevent lawyers from preparing wills that bequeath them any “substantial gift” from a client.

Gunderson arranged to receive the inheritances despite a longstanding California Supreme Court ruling that for a lawyer to accept anything more than a “modest” gift from a client’s estate raises questions of propriety. In that 1962 decision, the high court justices noted that the $20,000 involved in the case was a “substantial gift” that the attorney had been forced to surrender.

Gunderson, 67, boasts that he has represented as many as 7,000 residents of the Leisure World retirement community. His penthouse law office in Laguna Hills sits just across the street from Leisure World.

In addition to the State Bar investigation, the Orange County Sheriff’s Department fraud unit has set up a telephone hot line to gather information about possible “criminal wrongdoing” by Gunderson. The 6,000-member Orange County Bar Assn. has launched its own investigation into Gunderson’s practice, and the chief probate judge, Superior Court Judge Tully H. Seymour, has ordered a review of every probate case involving Gunderson.

Gunderson arranged to receive $3.5 million in stock from one estate and a 316-acre Fresno County farm from another. In yet another case, he persuaded a judge to name him legal guardian of an elderly Canadian women suffering from senile dementia. Gunderson then drafted a new will giving him the lion’s share of her estate--$225,000 worth of American Telephone & Telegraph Co. stock.