Most California trust and estate disputes involve adults who can make their own choices about what to seek and how hard to litigate, such as the common scenario of siblings competing for assets. But many disputes, or at least potential disagreements, involve people who can’t fend for themselves, such as mentally incapacitated adults, children
(Editor’s Note: The example in the post below has been revised.)
California causes of action are subject to various statutes of limitation. Unless a plaintiff or petitioner files a complaint or other document asserting a cause of action within the applicable limitations period, the filing will be deemed time barred and subject to dismissal. Under some circumstances, however, statutes of limitation may be tolled or suspended so as to extend the filing period.
When the COVID-19 pandemic caused court closures, the California Judicial Council responded with Emergency Rule 9, which tolled the statutes of limitation for civil actions from March 6, 2020 until 90 days after the Governor lifts the state of emergency, which will not occur until an unknown future date.
The initial emergency rule, issued April 6, has now been revised and partially clarified. As California courts began to reopen in May, the Judicial Council chose to put a clearer endpoint on the tolling of limitations periods. A memorandum from the Judicial Council provides background on the amended rule.
The COVID-19 pandemic has idled workers and the coming weeks will bring more news of business closures and bankruptcies. After a decade of sustained growth, we are facing a recession of uncertain depth and duration. The New York Times recently reported that some Americans are turning (or perhaps returning) to “financial therapy” for support.
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Bank trust departments, also referred to as corporate trustees, provide professional management to the administration of California trusts. People may choose to name a bank to act as successor trustee when they can no longer manage their own assets, either because they don’t have family members they can count on to handle assets or because they don’t want to burden family members with the role. Sometimes family members or a court may appoint a bank to take the place of an acting trustee as a means to resolve disharmony amongst the parties.
Alysia Corell joins us here to share her experiences as a trust officer. Alysia grew up in the Mt. Shasta area of Northern California and traveled south to attend San Diego State University where she majored in communications. She began to work in a bank trust department in 2003 and became a Certified Trust and Financial Advisor in 2008. She is a past president and current member of the Sacramento Estate Planning Council and a member of the South Placer Estate Planning Council. In 2018 Alysia joined the trust department of Exchange Bank.
While California trustees hope for smooth sailing, they must navigate waters that can be choppy depending on the assets, trust instruments and personalities involved. As fiduciaries, trustees must honor the trustors’ intent as expressed in the trust instruments. Sometimes the language is unclear and the trustee needs instruction from a court as to how to proceed.
If they are not already working with an attorney, most trustees will (and should) seek guidance from counsel when uncertain about what to do. An attorney, generally at the expense of the trust, can help the trustee decide whether to file a petition for instructions, draft the necessary paperwork, serve it on parties entitled to notice, and then appear in the probate department of the court on behalf of the trustee. Some DIY-minded trustees, however, may be inclined to proceed without paying an attorney. Business & Professions Code section 6125 provides that a person can’t practice law unless he/she is an active member of the State Bar of California. When can a trustee represent himself or herself in court without engaging in unauthorized practice of law?
Earlier this month, the Court of Appeal held in Donkin v. Donkin, Jr. (2020) 47 Cal.App.5th 469 that individuals acting as trustees may represent themselves when seeking instructions from a California court. Yet, like an inexperienced sailor who attempts a solo ocean journey, a trustee who proceeds without counsel risks serious missteps such that self-representation may end up being far more costly in the long run.
In California, the Attorney General oversees charitable trusts. This responsibility includes bringing legal actions against trustees who breach their fiduciary duties. Government Code section 12598 provides that the Attorney General is entitled to recover from a defendant all reasonable attorney’s fees and actual costs incurred in an action to enforce a charitable trust. But what happens when the Attorney General is only partially successful in its case against the defending trustee of a charitable trust?
People ex rel. Becerra v. Shine (2020) ____ Cal.App.5th ____ provides the answer. The Government Code does not require a stringent analysis of whether the Attorney General has achieved all of its litigation goals or has been completely successful on every claim. Further, the Attorney General is entitled to attorney’s fees when it has generally accomplished what it set out to do, which in People v. Shine was to prove that Shine had breached his fiduciary duties and to recover funds for the trust.
It’s unremarkable that California courts require that notice be given to affected beneficiaries in trust and probate proceedings. After all, the Fourteenth Amendment guarantees that no person will be deprived of life, liberty, or property without due process. While contingent beneficiaries may not have received an inheritance yet, they may someday and so should know if someone’s trying to tamper with their potential payday. But how far do notice requirements really go? Must notice be given to beneficiaries who likely won’t ever get a nickel?
The California Court of Appeal wrestled with this issue in Roth v. Jelley (2020) 45 Cal.App.5th 655, and held that beneficiaries who will only receive an inheritance upon the happening of an event (i.e., contingent beneficiaries) have a property interest in an inheritance and are therefore entitled to notice under constitutional due process requirements.
Tracy M. Potts has nearly three decades of experience in California with estate planning, administration and litigation. A Texas native, she earned her law degree from Southern Methodist University School of Law. Her leadership experience includes chairing the Executive Committee of the State Bar of California, Trusts and Estates Section, as well as the Sacramento County Bar Association, Probate and Estate Planning Section. She is a certified specialist in estate planning, trust, and probate by the State Bar of California, Board of Legal Specialization. She also is a fellow of the The American College of Trust and Estate Counsel.
Tracy’s law firm, Legacy Law Group, operates from the Natomas area of Sacramento. I sat down with Tracy at her office in February 2020 to discuss estate planning and dispute avoidance.
A primary purpose of estate planning is to determine what a child will inherit (if anything) upon a parent’s death. But what about a gift given during the parent’s life? Is it an advance on the child’s inheritance, like putting it on the child’s tab until the trust is cashed out? Or is the gift in addition to anything the child will get upon the parent’s death? The answer in California depends on the parent’s intent when the gift was made – more specifically, whether the parent wanted it to be an advance. The problem is determining the parent’s intent after death.
California Probate Code section 21135 describes the circumstances under which a lifetime gift will be considered an advancement against a beneficiary’s inheritance. In Sachs v. Sachs (2020) 44 Cal.App.5th 59, the Court of Appeal examined Section 21135 and concluded that a parent’s written records of lifetime gifts established them as an advancement against a child’s inheritance. This opinion provides guidance to parents who make gifts and to siblings in conflict over them.
Can a California trustee require a beneficiary to sign a release in order to get a distribution from a trust? A question like this appeared recently on the AVVO “Free Q&A” page and makes for a perfect blog topic.
Trustees understandably want to wrap up trust administration without having to worry about being sued by beneficiaries. When a beneficiary appears to be litigious, the trustee may want to dangle a preliminary or final asset distribution as a carrot to get the beneficiary to sign a release. Yet, since the trustee is a fiduciary, California law does not give a trustee unfettered discretion to insist on releases. An effort to prevent trust litigation could end up sparking such litigation.