At the Sacramento Estate Planning Council’s 2016 Technical Forum on Tuesday an elderly gentleman sitting next to me said “old accountants never die, they just lose their balance” and “old attorneys just lose their appeal(s).” Sometimes both happen when an unbalanced accounting results in a lost appeal. The California Court of Appeal issued a rare decision on January 6, 2016 concerning trust accountings, finding in Gray v. Jewish Federation of Palm Springs and Desert Area that Probate Code section 16373 allows a trustee to rob Peter to pay Paul (as long as Peter gets his money back eventually).
How Fictional Is John Grisham’s Novel About a Will Contest?
On a road trip over the holidays, I listened to John Grisham’s Sycamore Row, as artfully read by Michael Beck. Published in 2013, it’s a sequel to Grisham’s first novel, A Time to Kill, and again features young country lawyer Jake Brigance. This time, instead of an accused man, he’s defending the handwritten will of Seth Hubbard. Hubbard, a shrewd businessman, had a terminal illness and near the end of his life wrote a new will to favor his housekeeper over this two children.
Are will contests in California like the contest featured in John Grisham’s legal thriller? Yes and no.
An Introduction to Department 129 of Sacramento County Superior Court
This month Judge Steven M. Gevercer will replace Judge David F. De Alba as the probate judge in Department 129 of the Sacramento County Superior Court. Judge Gevercer was appointed to the bench by Governor Jerry Brown in 2012 and previously served in the California Attorney General’s Office.
Judges typically spend a year or two in Department 129 before moving on to other assignments within the court. Fortunately for all, the dedicated court staff who support Department 129 provide continuity over the years.
You May Have to Challenge Mom’s Trust Amendment Before She Dies
Most will and trust contests in California start several months after the death of the person who created the document. Such litigation has a forensic quality: did Mom have sufficient mental capacity back when she signed the will/trust, or was she the victim of undue influence? Mom is not around to testify as to what she thought and wanted, nor can expert witnesses meet her to evaluate her capacity. If the documents were executed many years ago, the trail of evidentiary breadcrumbs may be faint. A lawyer who contests old estate planning documents may find inspiration in Sherlock Holmes.
Increasingly, however, the fight over Mom’s trust will flare during her lifetime. For example, if Mom has moderate Alzheimer’s disease and a family member petitions the court to appoint a conservator over her estate (i.e., financial affairs), the court may review Mom’s estate plan and modify its terms if appropriate. Through the “substituted judgment” process laid out in the California Probate Code, the court for example might cancel a recent trust amendment on the ground that Mom did not sign it of her own free will, thereby restoring the prior version of the trust. In the conservatorship setting, the court need not wait for Mom’s death to evaluate the validity of the trust documents, and an earlier review may lead to a better result if evidence presently available, such as the testimony of a key witness, may be lost with the passage of time.
Fee Fi Fo Fum: Trustee Fees Can Be a Giant Issue in Trust Administration
Trustee fees are common flash points in the administration of family trusts. Trustees may put in hundreds of hours cleaning out and selling the family home, dealing with accountants, lawyers, and realtors, and otherwise working to distribute assets out to the beneficiaries. A diligent trustee provides a valuable service and should be compensated for his or her time.
From the beneficiary’s perspective, however, it may come as a surprise that Junior has obtained a handsome trustee fee by writing a check to himself. The beneficiary may feel that Junior should act as a volunteer and/or may believe that Junior has acted improperly in trust administration such that he deserves no fee.
Tick, Tock … When Will I Get My Share of Mom and Dad’s Trust?
Most family trusts call for the outright distribution of assets to specific individuals (i.e., remainder beneficiaries) after the creators of the trust are gone. In the most common scenario, the assets get doled out to the adult kids after Mom and Dad pass. Even when a trustee is diligent and the situation is straightforward, it may take several months to pay off debts, value the various assets, liquidate them, and then distribute the proceeds to the beneficiaries in proportional shares.
Many trust disputes start when the beneficiaries get frustrated with the apparent lack of action by the beneficiary who also serves as trustee. Brother trustee may decline to provide reports and documentation to the beneficiaries. It may appear that he wants to hold onto the assets to benefit himself in some way – for example, he may live in the comfortable house in Roseville that he holds in the trust without paying rent, or he may operate and draw a salary from the family business that is a trust asset.
Put Up Your Dukes: Courts Can Fix Mistakes in Wills … Sometimes
Sound estate planning requires a clear description of how property will pass upon death – in other words, who gets what. So what happens when the written terms differ from what the will’s creator actually wanted?
Earlier this year, the California Supreme Court ruled in Estate of Duke (2015) 61 Cal.4th 871 that courts may correct a mistake in the wording of a will even if the language in question is not ambiguous. The proponent of the correction (also known as reformation) must provide clear and convincing evidence of both (1) a mistake in the expression of intent and (2) the actual specific intent of the maker when the will was written. The decision opens the door in California to a new kind of trust and estate litigation.
Court of Appeal Clips Sterling
The California Court of Appeal blocked Donald Sterling’s last second shot at undoing the sale of the Los Angeles Clippers. Donald sought to overturn the results of an eight day trial that occurred in July 2014. The opinion, issued on November 16, 2015, should be of interest to settlors, trustees, and beneficiaries of “ordinary” trusts in California that do not hold a $2 billion NBA franchise.
The Court of Appeal hammered Donald for procedural deficiencies with his appellate briefs before ruling against Donald on all three issues on appeal. The court held that: (1) Donald was properly removed as trustee on the basis of his incapacity; (2) the trial court appropriately allowed the sale of the Clippers despite the pending appeal; and (3) Donald’s effort to revoke his trust was ineffective to stop the sale of the Clippers.
The Rising Tide of Trust and Estate Litigation
Inheritance fights are nothing new, nor is public fascination with them. Charles Dickens published Bleak House in 1853, satirizing the English legal system in the context of the fictional case of Jarndyce v. Jarndyce. More recently, John Grisham’s Sycamore Row, released in 2013, was at the top of the New York Times best seller list.
Are trust and estate disputes on the rise in California? I haven’t seen hard evidence on one side or the other, but it seems that a confluence of factors creates a rising tide.
When Does Influence Become Undue?
Undue influence is a major theme in trust and estate litigation. But when does advocacy for a change in an estate plan cross the line and become undue?
There is no bright line test for undue influence under California law. Almost always, the proof is indirect. While there is no video of Sister pressuring Mom to disinherit Brother on the drive over to the estate planning lawyer’s office, there may be compelling circumstantial evidence that Sister did just that. All of this leaves much to the discretion and life experience of the judge who decides the dispute.