|Fifth District Court of Appeal Fresno, CA|
A recent California Court of Appeal case addressed how to validly amend a trust.
King v. Lynch (2012) 204 CA4th 1186
Zoel Night and Edna Mae Lynch, husband and wife, created a revocable trust in July 2004. The trust's beneficiaries were the couple's 4 children and 2 grandchildren of their predeceased child. The original trust allocated a distribution of $100,000 for the 4 children and $50,000 for the 2 grandchildren. The remainder of the trust was to be given to one son, David. Said son was also the successor trustee.
Over the years Zoel and Edna amended the trust three times by tinkering with the monetary amounts of the distributions. In 2006, following a severe brain injury (yes those are the exact words of the court opinion), Edna unilaterally amended the trust which significantly enhanced the inheritance of one child, David. In particular, the sixth amendment reduced the distribution to $10,000 for each child and and $5,000 for each grandchild.
However, the trust stated "During the joint lifetimes of the Settlors, this Trust may be amended, in whole or in part, with respect to jointly owned property by an instrument in writing signed by both Settlors and delivered to the Trustee, and with respect to separately owned property by an instrument in writing signed by the Settlor who contributed that property to the Trust, delivered to the Trustee."
When Zoel and Edna passed away in 2010, David provided the required notice to the other beneficiaries. Prob C § 16061.7. The beneficiaries then filed a petition with the local probate court because at first blush it was clear that Edna had not properly amended the trust, i.e. only Edna had signed the 2006 amendments and the trust clearly stated that husband and wife needed to sign the amendment. Prob C § 17200(b)(1),(3).
On appeal, the appellate court held that because the trust contained a specific trust amendment procedure, the settlors were required to comply with that procedure in order to effect a valid amendment. Accordingly, since only Edna signed the 2006 amendments, these were deemed invalid because the trust required both Zoel and Edna's signature.
The takeaway from this case is to follow instructions. It is amazing how an ostensibly straight-forward task can mushroom into full-blown litigation. If Zoel had signed the amendment as well, months of litigation and thousands of dollars in attorney fees could have avoided because the amendment would have been valid.