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Hey everybody – it’s January! How was your New Year’s Eve? How did you celebrate? Did you go to a party? Did you host a party? Were there games at your party? What kind of games? Charades? Jenga?  Maybe you went crazy and played Twister!

What did I do at my New Year’s Eve party? Thanks for asking. I played my favorite party game: Corner Guests at Random and Ask Them to Tell Me What They Think a Trust Is.   

“Wait,” you say. “That sounds weird,” you say. “Why would you do that,” you ask.

I’ll tell you why: because the answers are fascinating, and vary wildly from person to person. Some say a trust is a legal entity, like a corporation. Some say a trust is a testamentary document, like a will. Others say that a trust is “probably some type of snack food.” There’s no real consensus. (NOTE: the only thing they all agree on is that this is a very fun game that they love to play. This is why I’m so popular and invited to lots of parties. Please do not fact check this.)

But do not judge my party attendees. You are reading this blog because you are an educated professional working in the field of trust and estate litigation (probably), while my party guests are just regular people who wish they had listened to their mother and attended their elderly uncle’s New Year’s party instead. Of course you know what a trust is. But the sad reality is that this knowledge makes you one of the elite few. Despite the fact that trusts have become a more and more common element of testamentary plans in recent years, it is still true that most people have no idea what a trust is. Even some judges don’t know what a trust is. And every so often, even probate judges get confused.

Don’t believe me? Look at the recent appellate decision in Newell v. Superior Court (2024) 107 Cal.App.5th 728, which had to issue a peremptory writ of mandate because of a fundamental misunderstanding of what a trust is.

The facts in Newell set out the typical sort of family drama that one expects to see in probate litigation.  Elderly father Arthur sets up a trust naming his daughter Lucy as the successor trustee and sole beneficiary after his passing. Neneth, a new caregiver, goes to work for Arthur and, within months, Arthur executes a restatement of the trust and a subsequent amendment to the restatement, the net effect of which is to disinherit Lucy completely and leave 100% of the trust’s assets to Neneth (as well as to name the new instruments’ drafting attorney as successor trustee, entitled to a hefty 15% of the trust’s assets as trustee fees. The drafting attorney unfortunately predeceased Arthur, leaving him unable to reap the benefits of his fiduciary breaches). 

None of that, however, is especially relevant to the Newell court’s decision. 

After Arthur’s passing, Lucy discovered Neneth’s skullduggery and filed a petition in probate court to: (1) invalidate the later trust documents; (2) remove Neneth as trustee; and (3) name herself as the replacement trustee. Shortly after filing, Lucy discovered that Neneth had used trust assets to purchase real property in Van Nuys, California, and taken title to the property in her name as trustee. Lucy quickly supplemented her petition, asked the court to impose a constructive trust on the Van Nuys property, and recorded a notice of lis pendens.

The Newell decision stems from Neneth’s subsequent motion to expunge the lis pendens. Neneth argued that a lis pendens was inappropriate because Lucy’s petition did not bring a “real property claim” – that is, it did not bring a claim that would affect title to, or possession of, real property.

The probate court agreed, and granted the motion to expunge the lis pendens. The court held that even if Lucy’s petition were successful, there would be no effect on title or possession of the property. After all, the court reasoned, title to the property was currently held by Arthur’s trust, and, if Lucy’s petition were successful, title to the property would still be held by Arthur’s trust. The fact that the trustee would change from Neneth to Lucy was immaterial.

Upon reading that holding, you, the educated trust and estate professional, shook your head with dismay. But, fortunately for your faith in mankind and the rule of law generally, so did the Court of Appeal.

The Court of Appeal was able to remedy the probate court’s mistake because the appellate justices, unlike anyone at my New Year’s Eve party, knew exactly what a trust is: “[u]nlike a corporation, a trust is not a legal entity.  Rather, a trust is a fiduciary relationship with respect to property.”  That is, a trust is not a person or an entity that can own property: “[t]rusts do not own property; trustees do.”

The probate court’s mistake was in treating the trust’s interest in real property like a Jumbotron hat shuffle game: the property is the ball that gets shoved under a hat (the trust), and no matter how much things get shuffled around, the property stays under that same hat. But the Court of Appeal recognized that because a trust is not an entity in and of itself, a change in trustee means a change in ownership. If Lucy’s petition were successful, Neneth would be removed as trustee, and thus title to the Van Nuys property would move from Neneth to Lucy, as the new trustee. In the Court’s words, “title would still be in the name of the trustee, but the trustee would be a different person . . . That’s a pretty big effect on the title to the Van Nuys property.” It was certainly enough for Lucy’s petition for removal to constitute a “real estate claim,” and thus justify the imposition of a lis pendens.

All of this adds up to one very important lesson for you, the trust and estate litigator carefully crafting your arguments for court: never assume that anyone knows what a trust is. Not even a judge. Not even the intelligent and experienced probate judge hearing your case. A trust is a unique creature under the law, with a unique propensity to confuse even the most astute among us. 

Not you, of course. You will know exactly what to say at next year’s New Year’s Eve party.