October 2019

A key feature of a California revocable trust is that it can be amended.  Revising a trust can, however, seem like an irksome chore so it’s common for creators of trusts (i.e., “settlors” or “trustors”) to shrug off an amendment until it becomes clear they have limited time to settle their affairs.

Such procrastination invites mistakes, including failure to comply with a trust’s built-in procedure for amendments.  Indeed, while many trust instruments do not specifically prescribe how they may be amended, others do – often requiring “delivery” of the amendment to the trustees or settlors, that the amendment be signed, or both.

What happens when a settlor does not fully comply with the trust instrument’s modification procedure, even though it’s achingly obvious that he intended to amend his trust?  Should a court rigidly bind him to the modification procedure or should it follow what seem to be his dying wishes?  The California Court of Appeal faced this conundrum recently in Pena v. Dey (2019) 39 Cal.App.5th 546.  The court required strict compliance with the trust’s modification procedure, rejecting a Post-it® note as satisfying a signature requirement. 

California’s probate process aims to expeditiously identify and resolve the claims of creditors against decedents.  Creditors who are unsophisticated, or who simply do not learn of the decedent’s passing, may find themselves with an uncollectable claim against an otherwise solvent estate.  You snooze, you lose.

On the other hand, once a creditor makes a claim in a California probate case, the claim can lie dormant like an oak tree in winter and later come to life to interfere with the distribution of the decedent’s assets.  That’s the lesson of Estate of Holdaway (2019) 40 Cal.App.5th 1059, published by the Court of Appeal this month.