August 4, 2011

Trust and Probate Litigation

A trust or will, like any legal document, is subject to disputes among interested parties for an assortment of reasons. The following are some common reasons why parties might litigate the contents of a trust or will or its administration. 

1. Interpretation 

Even though the person, or their attorney, writing the will or trust knows, or at least should know, what they are writing it does not necessarily mean that a third-party understands the document. The following example is case which required judicial resolution due to an obvious ambiguity.

On May 2, 1957 Coral Williams of Los Gatos, California wrote a holographic will with the following clause:

"To The University of Southern California known as The U.C.L.A. My entire Estate for Educational purposes.” Estate of Black (1962) 211 Cal.App.2d 75. 

Indisputably, the University of Southern California is known by the acronym “U.S.C.” whereas the acronym “U.C.L.A.” stands for the University of California, Los Angeles. Naturally, litigation ensued because each school believed that it was the rightful beneficiary to Ms. Williams’ estate as directed by her will. 

2. Undue influence 

When somebody writes a will or trust that does not comport with their personality, habits or lifestyle, the common refrain is that the will or trust was the result of undue influence. The following is an example of such. 

James Gunderson, an erstwhile California attorney, routinely wrote wills and trusts which were clearly the result of undue influence. Gunderson would draft wills in which he would name himself as the exclusive or primary beneficiary at the exclusion of the decedent’s heirs. He wrote trusts in which he named himself trustee of large trusts. In turn, while serving as trustee of these trusts, he would hire his own law firm to handle legal services for the trust, classic double-dipping. As trustee, he would invest large sums of money in business entities in which he had an ownership or managerial interest. Naturally, Mr. Gunderson’s outrageous conduct ultimately led to his resignation from the State Bar of California, with subsequent disbarment all but certain should he not have resigned, and also a new law.  

The law, which is still valid, basically disqualifies certain individuals from receiving a bequest from a will or trust, if they assisted in the preparation of it, unless there was consultation and approval by an independent outside attorney. Prob C §§21350-21356.

A rule of thumb for undue influence is that if a will or trust looks suspicious, there is probably a valid reason behind that suspicion. Every client I have had has left their estate to their spouse or their kids, a charity or some logical beneficiary. So if a person suggests that they want to write a will and name some random person in a distant place as the sole beneficiary, you probably have undue influence on your hands. 

3. Breach of a fiduciary duty 

Breach of a fiduciary duty is a common reason why individuals litigate in the trust and will context. A fiduciary duty is basically the legal duty on an individual, when acting on behalf of another, to serve the best interests of individual being assisted. If an individual breaches a fiduciary duty they owed to somebody, there can be serious legal liability.

In terms of a trust, the trustee of a trust owes a fiduciary duty to the beneficiary. This fiduciary duty is manifested by requiring the trustee to be loyal to the beneficiary’s interest rather than themselves, act prudent, disclose material facts to the beneficiary, keep the beneficiary informed of important matters, etc. Each of these aforementioned duties imposes separate responsibilities on the trustee. Thus, even though a trustee may comply with certain duties this does not excuse them from complying with all their duties. This previous post details cases in which the trustee did not comply with their fiduciary duties.