Many California will and trust disputes arise from ambiguity in the document with respect to who is entitled to an asset.  Maybe the document was hazy from the start or perhaps circumstances have changed such that the rightful recipient is no longer clear.

Two cases decided in the California Court of Appeal last year illustrate the conflicts that surface over interpreting wills and trusts.  In both cases, coincidentally involving 35 percent shares, the appellate courts overruled the trial courts, nicely illustrating the complexities of will and trust interpretation.  California Probate Code sections 21101-21118, though obscure, can be pivotal in the analysis.

It’s generally not easy to sue a deceased person’s estate in California. In most cases, claimants must file a creditor’s claim before proceeding with a lawsuit in the Superior Court, which may first require bringing a petition to open up probate of the decedent’s estate. Claimants must move quickly given the one-year statute of limitations under California Code of Civil Procedure section 366.2.

In traffic accident situations, however, the claimant has a streamlined procedural path if he or she limits the claim to the auto insurance coverage held by the decedent. In such a case, under California Probate Code sections 550-555, the claimant effectively sues the insurance company, with the decedent’s estate only being a nominal defendant.

A recent appellate case from the Third District Court of Appeal, Meleski v. Estate of Albert Holden (2018) 29 Cal.App.5th 616, strengthens the position of California accident victims by allowing them to obtain recoveries in excess of policy limits if the insurance carrier refuses to accept a settlement offer and the claimant then obtains a court judgment in excess of the offer. The decision should incentivize carriers to accept policy limits settlement offers.

Cooks in the Kitchen

Are six sibling co-trustees too many cooks in the kitchen? Many California trust disputes arise from disagreements among sibling co-trustees over how to administer Mom and Dad’s trust after the parents have passed. They all have a strong sense of what Mom and Dad wanted, but they don’t agree on what it was.  Thus, trust and estate litigators can be described as “sibling lawyers.”

A recent appellate opinion illustrates such co-trustee conflict and shows the unpredictability of our judicial process. In Trolan v. Trolan (2019) 31 Cal.App.5th 939, the California Court of Appeal addressed issues of trust interpretation and trustee removal in a situation where five siblings were aligned against the sixth.

American courts (including our California state courts), in contrast to courts in England, do not typically award attorneys’ fees to a lawsuit’s “victor.”  There are, of course, exceptions to this so-called “American Rule.”  Among them is the “common fund” exception, which provides that one who incurs fees winning a lawsuit that creates a fund for others may require those passive beneficiaries to bear a fair share of the litigation costs.  As the word “fund” suggests, the benefit must be a tangible, easily calculable sum of money.  Courts have applied this exception to will and trust disputes where one beneficiary’s litigation causes other beneficiaries to receive a larger inheritance than they otherwise would have received.

But what happens when a trust beneficiary prevails in a lawsuit that doesn’t result in a tangible, monetary benefit but rather one such as removing an incompetent trustee or causing a trustee to prepare an accounting?  May beneficiaries who receive such benefits, but who take no part in the litigation, be required to pay for a portion of the litigating beneficiary’s legal expenses?  Last month the California Court of Appeal, in Smith v. Szeyller (2019) 31 Cal.App.5th 450, answered the question with a tantalizing “very possibly.”

Trust and estate litigation attorneys are “trusted advisors.”  Like estate planning attorneys and other professionals who help clients with wealth management, we are fixers who assist clients with navigating conflict relating to a trust or estate.  While we spar in the probate departments of the Superior Court of California, at the end of the day our main function is to advise clients so they can choose a resolution that fits their needs and is achievable in the situation at hand.

The role of litigator as trusted advisor came to mind last week as I sat at McGeorge School of Law listening to Todd Fithian’s upbeat and insightful presentation on the subject of “Amplifying Your Brand.”  Todd spoke at the Sacramento Estate Planning Council’s annual Estate Planning Forum event which offers outstanding continuing education and serves as a collaboration incubator for professionals in various fields.

Mental capacity issues are commonplace in California trust and probate litigation.  Jonathan Canick, Ph.D., who spoke last year at the Sacramento Estate Planning Council on the subject of “Aging, Cognition and Capacity,” graciously offered to share his thoughts with us here.

Dr. Canick has practiced neuropsychology for over 30 years. He is a member of the departments of psychiatry and neuroscience at California Pacific Medical Center, an associate clinical professor, University of California, San Francisco, and a member of the Board of Directors of Legal Assistance for Seniors, an Oakland-based nonprofit. He was a co-author of a research paper entitled “Reversal of Cognitive Decline in Alzheimer’s Disease” that was published in the June 2016 issue of the journal Aging.

When musician Prince Rogers Nelson died at the age of 57 on April 21, 2016, he had no estate plan in place, not even a will.  We blogged that “You Don’t Have to Be Rich to Need an Estate Plan.”

As the third anniversary of Prince’s death approaches, his probate estate continues to be administered in Carver County District Court in Minnesota.  Judge Kevin Eide issued orders naming Comerica Bank & Trust as Personal Representative (i.e., administrator) of the Estate and identifying Prince’s six siblings and half-siblings as the heirs.

Litigation involving the Estate spilled over into California in December 2018 when Paisley Park Enterprises, Inc. (Prince’s company) and Comerica as Personal Representative filed a motion to compel compliance with a subpoena by a Redding-area law firm, Sidebar Legal, PC.  See Paisley Park Enterprises, Inc. v. Boxill, U.S. District Court, Eastern District of California, Case No. 2:18-mc-00211-MCE-KJN. 

Can a disinherited person contest a trust amendment under California Probate Code section 17200?  No, said the Court of Appeal last August in Barefoot v. Jennings (2018) 27 Cal.App.5th 1.

The Barefoot opinion put pending trust contests in jeopardy, as contestants typically have used section 17200 as the procedural hook to challenge trust amendments that disfavored them.  Last week, however, the California Supreme Court granted review of Barefoot such that the opinion no longer has precedential value.

What is a reasonable trustee’s fee in California for a family member who acts as trustee?  We see a high degree of conflict over this issue even when the amount of the claimed fee is small compared to value of the trust estate.  Our blog analytics show that our post of a few years ago on the fee issue continues to draw a high number of hits.  If you found this post in a Google search, you are probably grappling with a fee dispute in your family’s trust.

California Probate Code section 15681 generally permits a “reasonable” fee, but the term is hazy in practice.  Most California Superior Courts do not have fee guidelines in their local rules.  While California Rule of Court 7.776 lists factors a court may consider in reviewing trustee compensation, the trustee and the beneficiaries are likely to apply those factors differently.  Accordingly, fee disputes are common in California trust litigation.

Here we’ll discuss best practices for a trustee with respect to claiming a fee.  Let’s use the common situation where Mom and Dad have picked one of their several children to act as successor trustee when they die or become incapacitated.  When Larry becomes the trustee, siblings Moe and Curley may be resentful and thus disinclined to go along with any fee. 

What happens when the settlor (i.e., creator) of a trust imposes a condition precedent on receipt of a distribution from the trust, but the condition cannot be met because the circumstances have changed?  Is the beneficiary out of luck for reasons beyond his or her control?

The First District Court of Appeal took up this issue in Schwan v. Permann (2018) 28 Cal.App.5th 678, finding that the doctrine of impossibility can excuse a condition precedent.  While impossibility comes into play infrequently in California trust and estate disputes, the doctrine allows some flexibility in the terms of trusts and wills so as to achieve an equitable result.