April 29, 2019

Trustee-Attorney of a Trust Part II

In a prior post from 2016, I discussed the dangers of being an attorney that serves as the trustee of another's trust (as opposed to the attorney representing the trustee). 

A recent unpublished appellate opinion highlights this danger, as another California attorney made this unfortunate decision.

"In 1988, Virginia and Lloyd created the Trust. The beneficiaries of the Trust were the couple's four adult children: Jean, Julie, Wayne, and Patricia (not a petitioner). Virginia and Lloyd were "astute" business people who bought, sold, and rented various real estate properties. Lloyd was particularly "frugal" in his business and private affairs. The couple's estate was worth about $3 million.

In 2009, Virginia and Lloyd were both diagnosed with dementia. Virginia and Lloyd became progressively worse, but Virginia's dementia progressed more rapidly. In 2011, Virginia was placed in an assisted living nursing facility. In March 2012, Virginia passed away. Without notifying his children, Lloyd then married Marion, who also suffered from dementia.

In August of 2012, Knighton stopped working as an attorney in a law firm. Her salary had been $220,000 per year plus bonus. In September 2012, Knighton began doing legal and caretaking work for Marion and Lloyd.

In January 2013, Lloyd executed a power of attorney naming Knighton as his agent. Lloyd later agreed to pay Knighton a flat fee of $220,000 per year; there was no written retainer agreement.
In April 2014, Lloyd executed an amendment to the Trust naming Knighton as a cotrustee. In September, Lloyd signed forms naming Knighton as the primary beneficiary of five annuities worth $300,000. Knighton submitted a form to the annuity provider requesting a change of address from Lloyd's address to Knighton's home address. Lloyd's financial advisor, Carmello Buscemi, expressed concerns regarding undue influence. In December, Lloyd terminated Buscemi."

"On August 22, 2017, the court filed a statement of decision after a trial. The court imposed surcharges, gave a credit for Knighton's services, and imposed double damages. "[T]he testimony and evidence supports a finding that Lloyd Gross from October 2013 up until the time of his death on February 22, 2016 did not have sufficient mental capacity to enter into a valid contract such as the flat fee arrangement for $220,000 agreed to in October 2013 and to make the change of primary beneficiary for five annuities executed on September 5, 2014."

The trial court's decisions were all upheld by the appellate court.

Storey-Gross et al. v. Knighton, Orange County Superior Court case # 30-2015-00777776.