February 25, 2016

Drafting a Trust for a Parent

An occasional phone call I've received over the years has been from a child requesting that a trust be written for their parent.  Uh-huh, go on........

There are perfectly legitimate reasons why a child might inquire on behalf of a parent to do so, e.g. the parent might not be Internet savvy, the parent lacks a cellphone or email address to coordinate a meeting. Conversely, there are nefarious reasons why a child might do this, namely the child wants the parent to write the trust to principally benefit themselves. Sadly this brings us to the tale of the late Connie Martinez Acosta.

Prior to her passing, Ms. Acosta had a trust prepared by an attorney (who probably should've known better). The main beneficiaries of the trust were two of her children, sons Ernest and Ronald. She had seven children in total. Ernest and Ronald were to inherit an equal share in Ms. Acosta's home. However, Ronald would be solely responsible for the mortgage payments. Thus, the largest beneficiary of the trust would be Ernest. 

When Ms. Acosta passed away, a daughter challenged the validity of the trust. The crux was that Ernest had principally orchestrated the creation of the trust for his benefit. Whoops. Predictably, the trial court found that Ernest had unduly influenced his mother and the trust was voided. 

For reference, to prove undue influence, the following elements need to be proved: (1) the existence of a confidential relationship between the testator and the person alleged to have exerted undue influence; (2) active participation by such person in the actual preparation or execution of the [document], such conduct not being of a merely incidental nature; and (3) undue profit accruing to that person by virtue of the [document]. If this presumption is activated, it shifts to the proponent of the [document] the burden of producing proof by a preponderance of evidence that the [document] was not procured by undue influence. It is for the trier of fact to determine whether the presumption will apply and whether the burden of rebutting it has been satisfied. " Estate of Sarabia, (1990) 221 Cal.App.3d 605.

Here these elements could easily be proven. First, Ernest was the son of Ms. Acosta. Second, Ernest actively participated in the creation of the trust, i.e. he completed the attorney's intake sheet. Third, Ernest received the largest beneficial interest in the trust.