Can an Email Amend a Revocable Trust?

Can emails to an estate planning attorney constitute an amendment to an individual's revocable trust? This interesting legal question was the focus of a recent appellate case:

Jerry and Mary Trotter, who were married, established the Trust as a revocable trust in 2011, and named themselves collectively as both "Trustee" and "Trustors." The Trust names Timothy, their son, as the successor trustee in the event neither Jerry nor Mary can act as a trustee. The Trust also provides that upon the death of whichever spouse survives the other, certain stock is to be distributed to Timothy, and the rest of the trust estate should be distributed in equal shares to each of several children, including Jerry's daughter from another marriage, Van Dyck.

When Jerry died in 2012, Mary became the sole trustee. According to declarations in the record, Mary intended to exclude Van Dyck as a beneficiary because Van Dyck had already inherited from Jerry's previous wife, and Mary believed Van Dyck had "been fairly provided for" in 2015. In relevant part, the Trust authorized Mary to amend the Trust "by an instrument in writing signed" by Mary and delivered to the "Trustee" — at the time, herself.

In late June 2020, Mary, Timothy, and Matthew Pribyl, Mary's estate planning attorney, exchanged e-mails about amending the Trust, excerpted below. On June 25, before her scheduled surgery on July 1, Mary e-mailed Timothy stating:

"My mind is quite clear now as [to] how to move forward on the house and will.

"I will write it out and then we need to see that the lawyer gets a copy asap and start redoing the will and trust.

"1. The house will go to you

"2. My cash assets will be divided among my five children; nothing to Wendy [¶] . . . [¶]

"The rest of selected items will be assigned to different children/grandchildren and I'm working on that list.

"Thanks, mom"

Mary underwent surgery the next day on July 1, 2020, and contracted an infection while in the hospital. She suffered two heart attacks and passed away a few weeks after her surgery. Timothy became the successor trustee, and when disputes arose about the administration of the Trust, Timothy petitioned the probate court for instructions. He sought, among other things, guidance about "whether under the express terms of the Trust, [Van Dyck], by reason of Mary's writings, has been removed as a beneficiary of the [Trust]."

Timothy J. Trotter (Timothy), successor trustee of the Trotter Family Revocable Trust (Trust), petitioned the probate court seeking guidance about whether certain e-mails from his mother, Mary Trotter (Mary), constituted a valid amendment to the Trust's beneficiaries. The court found that Mary's writings were insufficient to constitute an amendment to the Trust, and it ordered that the Trust be distributed to its original beneficiaries, including Wendy Trotter Van Dyck (Van Dyck).

The appellate court concluded "that at least two of the grounds the court relied on were proper: (1) there was no signed document amending the Trust and the electronic signature provision of the Uniform Electronics Transaction Act (UETA) does not apply because a unilateral trust amendment does not constitute a "transaction" within the meaning of the statute (Civ. Code § 1633.2, subd. (o)); and (2) Mary's writings did not adequately express an intent to amend the trust by the writings themselves."

Trotter v. Van Dyck (2024) ____ Cal.App.4th ____

Trust Modification - Haggerty v. Thornton

A common question posed by estate planning clients is how to appropriately amend their trust. Practically every trust will specify how to amend the trust, e.g. through a signed writing, through a signed writing acknowledged before a notary public, etc. 

A recent California Supreme Court case addressed the issue of how to validly modify a trust.

"It is undisputed that if the trust instrument is silent on modification, the trust may be modified in the same manner in which it could be revoked, either via the statutory method or via any revocation method provided in the trust instrument. In this case, we consider the circumstances under which the statutory method is available for modification if the trust instrument specifies a method for modification."

"Brianna McKee Haggerty appeals an order of the probate court finding a trust agreement was validly amended, thereby excluding her from distribution. Haggerty's aunt, Jeane M. Bertsch, created a trust in 2015. The trust agreement included a provision reserving "[t]he right by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder." In 2016, Bertsch drafted an amendment providing for a distribution to Haggerty. The amendment was signed by Bertsch and notarized."

"In 2018, Bertsch drafted an amendment providing that half of her assets would go to various beneficiaries upon her death, including the Union of Concerned Scientists, Patricia Galligan, and Racquel Kolsrud, who are respondents in this case. Haggerty was not listed as one of the beneficiaries. The 2018 amendment was signed by Bertsch but not notarized. Thus, the 2018 amendment was compliant with the statutory method but not with the method of modification specified in the trust instrument."

"After Bertsch's death, Haggerty filed a petition to determine the validity of the 2018 amendment. Haggerty argued that the amendment does not qualify as an "acknowledged instrument" because it was not notarized and therefore was not modified pursuant to the method of modification specified in the trust instrument. In a minute order, the probate court held that the 2018 amendment was valid."

The California Supreme Court held that "under section 15402, a trust may be modified via the section 15401 procedures for revocation, including the statutory method, unless the trust instrument provides a method of modification and explicitly makes it exclusive, or otherwise expressly precludes the use of revocation procedures for modification." 

Haggerty v. Thornton S271483 (Feb 08, 2024)

Amending a Trust (validly)

Following the passing of a relative or friend, the search begins to discover if the decedent had any estate planning documents. Obviously this process is easier if the decedent previously told their family and friends that they executed estate planning documents and where to find the documents. Regardless, the documents need to be retrieved and authenticated in order to properly administer the estate.

The estate planning documents could be found in a safe deposit box, at the decedent's home or some other place. Usually all the documents are found in one place. So if one document is found, e.g. the trust, it should be expected to find the will in the same place as well.

Some attorneys (I'm not one of them) provide clients with an estate planning binder. The binder will contain all the estate planning documents, i.e. trust, will, power of attorney, etc. Occasionally I will see that the binder contains preprinted forms to amend the trust or modify the will. Fortunately I've not had a case where the estate planning binder contained an amendment of questionable validity. In a recent unpublished decision, the successor trustee encountered this issue.

"Yvonne created the Yvonne Ellias Living Trust (Trust) in 2007. She amended the Trust in 2018, naming her stepdaughter, Veronica Ellias, as trustee. Section 1.04 of the Trust provides: "Any amendment, restatement, or revocation must be made in writing and delivered to my then-serving Trustee." Yvonne passed away on February 20, 2021. The Trust became irrevocable upon her death.

 Yvonne purportedly amended the Trust twice more before she died, in June 2019 and July 2020. The amendments purportedly redistributed Yvonne's assets, including her home, from Veronica to David upon Yvonne's death. Veronica discovered the amendments after Yvonne died, inside a binder containing the original estate planning documents."

The appellate court affirmed the trial court's ruling that the purported amendments were invalid.

"Here, section 1.04 requires any modification of the Trust to be "delivered to [Yvonne's] then-serving Trustee." (Italics added.) Thus, as David concedes, for Yvonne to validly amend the Trust pursuant to its terms, she was required to deliver the amendments to Veronica. But Yvonne did not do so when she purportedly executed the Trust amendments or at any other point before she passed away. Nor is there evidence that Veronica had access to Yvonne's estate planning binder before her death such that the amendments were "effectively" delivered to her, as suggested by David. Yvonne therefore could not have amended the Trust pursuant to its terms. (See Lombardo v. Huysentruyt (2001) 91 Cal.App.4th 656, 670 [trust modification ineffective if trust requires delivery of modification to trustee and settlor fails to inform trustee of modification].)"

Estate of Ellias, Ventura County Superior Court case no. 56-2021-00556111-PR-TR-OXN

Amending a Trust

Practically every revocable trust will contain an amendment or modification clause which details how the trust can be validly changed. For example, the settlor may want to modify the successor trustee or beneficiaries because of a change in circumstances. It is common to change a revocable trust at least once during the lifetime of the settlor(s).

A recent published appellate decision touched upon the issue of compliance with a trust amendment clause:

Pena v. Dey (2019) _______ CA4th _______

"In this case, we must determine whether James Robert Anderson, settlor and trustee of the James Robert Anderson Revocable Trust (the trust), validly amended the trust when he made handwritten interlineations to one of the operative trust documents, specifically the First Amendment to the trust (First Amendment), making Grey Dey a beneficiary. After making the interlineations, Anderson sent both the original trust instrument and the interlineated First Amendment to his attorney to have the new disposition of his trust estate formalized in a second amendment to the trust. Anderson died before the formal amendment was prepared for his signature."

"We conclude the interlineations did not validly amend the trust because the trust specifically requires amendments "be made by written instrument signed by the settlor and delivered to the trustee." (Italics added.) While the law considers the interlineations a separate written instrument, and while there can be no doubt Anderson delivered them to himself as trustee, he did not sign them. Instead, he sent them to his attorney to have them formalized into a second amendment to the trust and prepared for his signature, evidencing his intent to sign the changes to his trust at a later date. We also reject Dey's argument that Anderson effectively signed the interlineations by attaching a Post-it® note to the documents he sent to his attorney, on which he stated: "Hi Scott, [¶] Here they are. First one is 2004. Second is 2008. Enjoy! Best, Rob." We cannot conclude these lines on the note were part of the written instrument comprised of the interlineations to the First Amendment to the trust such that the signature on the note effectively signed the interlineations. Instead, Anderson signed a separate note indicating what the enclosed documents were. While there is no dispute in this case that Anderson intended Dey to receive a portion of his trust estate, there is also no genuine dispute that Anderson intended to sign this and other changes to his trust when formalized by his attorney. Unfortunately, he died before that could be accomplished. We must therefore affirm the summary judgment entered in this case."

It is clear that Mr. Anderson intended to change his trust and made a substantial effort to do so. Unfortunately he did not complete the process, i.e. signing the amendment, and that was the crux of Mr. Dey's argument. 

Duties to a Non-Client?

A lawyer owes various fiduciary duties to a client. These include the duty of loyalty, confidentiality, competence, etc. A list of these duties can be found in the California Rules of Professional Conduct (CA Attorney Ethics Rules). 

However,  a lawyer generally does not owe such duties to a non-client. Moore v. Anderson Zeigler Disharoon Gallagher & Gray (2003) 109 Cal.App.4th 1287, 1294. Furthermore, an attorney does not owe a duty to non-clients to ascertain a client competence's when making a trust or will revision. Id. at 1290.

In Moore, decedent's children sued the estate planning attorney for malpractice. Just prior to his passing, decedent was in poor health. According to the appellate opinion "by June 2000 Clyde was extremely sick, debilitated, and confused. Clyde had undergone chemotherapy and was under the influence of powerful medications, including pain medication." Nevertheless, the attorney drafted and decedent executed an amendment to his trust. The amendment was executed on June 21, 2000 and decedent passed away on June 23, 2000. Hence, at most, decedent had 48 hours to live when he executed the amendment. 

This amendment reduced the distribution to some of the children. Litigation then ensued between the beneficiaries. 

Surprise surprise.

Once the litigation had settled, they then sued the estate planning attorney and his law firm for malpractice.   

The plaintiffs, non-clients, sought to impose a duty on the attorney to ascertain decedent's mental capacity and since decedent was extremely ill, the attorney acted negligently in "failing to 'assure, confirm and document' that Clyde had capacity and was competent to execute his will and trust amendments."

The Moore Court rejected imposing such a duty, finding that determining "testamentary capacity is often difficult and the potential for liability to beneficiaries who might deem any investigation inadequate would unjustifiably deny many persons the opportunity to make or amend their wills." 

"Factors which might suggest lack of testamentary capacity to some attorneys do not necessarily denote a lack of capacity. It has been held over and over in this state that old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize old friends or relatives, physical disability, absentmindedness and mental confusion do not furnish grounds for holding that a testator lacked testamentary capacity." (Estate of Selb (1948) 84 Cal.App.2d 46, 49."  

Trust Amendment vs. Trust Restatement

Once a client executes a revocable trust, a common follow-up question is what to do in case the client's situation changes that necessitates a change to their trust. For example, they get married, decide to change a beneficiary, have a child, move to another state, inherit a large sum of money, etc. The two options are to either execute an amendment or a restatement.

Amendment

When a trust is amended, the amendment should specifically cite the section that is being amended and the contents of the amendment. For instance, assume Section II of the settlor's trust originally calls for Thierry Pires to be the successor trustee and now the settlor wants to have Robert Henry be the successor trustee. The amendment would state that the settlor is invoking their right to amend the trust and Robert Henry is now the successor trustee, i.e. Section II would be written to reflect such.

A benefit of an amendment instead of a restatement is that it is generally simple to complete. The client merely needs to state what they want changed to the attorney.

One detriment of an amendment instead of a restatement is that multiple amendments can be cumbersome to harmonize with the trust. If the settlor amends their trust multiple times, the trust and the amendments must be read and interpreted as one document. This sounds like an easy task but in practice it is not. Cross-referencing the trust with the amendments is time-consuming.

Another detriment is that if the settlor amends their trust to remove a child as a beneficiary, the child will be able to see that they were cut out of the trust. A child, as an heir, is always entitled to see a copy of a parent's trust. See Prob C § 16060.7. Thus, the child can see that the parent originally included them as a beneficiary but later changed their mind. At best it invites scrutiny and at worse it triggers litigation.

Restatement

A restatement is essentially the replacement of a settlor's original trust. Though the restated trust uses the date of the original trust's execution, e.g. March 5, 2004, the restated trust is a brand new document.         

A restated trust is usually preferred to an amendment when the change is either too difficult or lengthy. For example, if the settlor wishes to revise the distribution portion of their trust and include specific instructions about the timing and amount of distributions, a restatement is preferred to an amendment.

A benefit of a restatement instead of a amendment is that it reduces the amount of paperwork. Since the restated trust replaces the original trust, the successor trustee does not have to piece together the original trust and the amendment(s). Alternatively stated, it is much easier to manage one document than multiple documents.

A detriment of writing a restated trust instead of an amendment is the cost. An attorney will have to devote more time towards drafting a restatement than an amendment because an entire new trust has to be created. Since the attorney has to devote more time to the matter, the fee will be higher.   

Undue Influence involving a California Trust

One method in which a testamentary instrument can be voided is if it is the product of "undue influence." California case law says that undue influence is dependent upon the facts and circumstances of the situation. Sparks v. Sparks (1950) 101 Cal.App.2d 129, 135. Thus, there is no set of elements which need to be established in order to show that undue influence has occurred.

However, there are situations which suggest a showing of undue influence. These include the following: (1) unnatural provisions cutting off from any substantial bequests the natural objects of the decedent's bounty; (2) dispositions at variance with the intentions of the decedent, which he or she may have expressed both before and after execution; (3) relations between the chief beneficiaries and the decedent that afforded the chief beneficiaries an opportunity to control the testamentary act; (4) a mental or physical condition suffered by the decedent that permitted the subversion of his or her freedom of will; and (5) the chief beneficiaries' active procurement of the contested instrument. (Estate of Lingenfelter (1952) 38 Cal.2d 571, 585.

An example of undue influence occurred in the case Arnold v. Fuller, Los Angeles Superior Court Case No. BP122665. Thelsey Fuller was the father of five children, Robert Fuller, Doris Fuller, Shirley Ritchey, Sandra Arnold and Steven Fuller. Prior to forming his trust, Mr. Fuller expressed his intentions to evenly divide his trust estate equally amongst his five children. Consequently, Mr. Fuller executed a trust on July 23, 2008 which evenly distributed his trust estate to his five children.

Only two months later on September 16, 2008, Mr. Fuller curiously amended the distribution clause in his trust. It read: "On the settlor's death, the remaining trust estate shall be disposed of as follows: [¶] Shirley C. Ritchey shall be given the amount of forty dollars ($40.00), Sandra Arnold shall be given the amount of forty dollars ($40.00), Steven A. Fuller shall be given the amount of ten dollars ($10.00). [¶] The remaining trust estate shall be distributed as follows: [¶] Robert Fuller shall be given fifty percent (50%) of the trust estate. [¶] Doris Fuller shall be given fifty percent (50%) of the trust estate." 

Hmmm.............

Shirley Ritchey and Sandra Arnold filed a petition to have the September 16, 2008 amendment voided, citing undue influence. The trial court determined that such amendment was the product of undue influence and voided the amendment. This judgment was upheld on appeal in an unpublished decision.  

An undue influence case can usually be easy to spot. For example, the cases I've seen involved a tortfeasor befriending an elderly person who amends their trust or will to the benefit of the tortfeasor at the cost of cutting out their children and/or grandchildren from his or her estate. Where there is smoke, there is usually a fire.......     

Trust Modification

One should not be penny-wise pound-foolish when amending a trust

There are many issues in life that, at first blush, require ostensibly only a slight tweak, gentle nudge or subtle adjustment. For example, a leaking faucet, a malfunctioning toilet or a porous roof are just a few of the many items that many Americans (think they) can fix themselves. Yet many people mistakenly assume that a slight modification to their trust requires only a small notation here or there. Yet, when that person passes away, typically their do-it-yourself efforts will have yielded disastrous results which they naturally did not anticipate. The reason being is that amending a trust is not as simple as putting pen to paper without any preparation.

A California Court of Appeal decision, King v. Lynch (2012) 204 CA4th 1186, held that if a trust calls for a certain modification method, that method must be used to validly amend the trust. 

Many trusts have a requirement that any modification be in writing and be acknowledged before a notary public. The rationale behind the latter requirement is to curb fraud. If nobody can attest to the modification by the person, fraud suspicions will naturally arise. Thus, the need for a notary who can certify that the person who signed the trust amendment is in fact who they say they are. In particular, the notary is required to obtain proof of identification from the signatory. This most often comes in the form of a driver's license.

In practice, there are numerous cases out there where the person who wrote the trust (called a "settlor") decides to amend their trust without the assistance of counsel. This usually manifests itself through strike-outs and insertions in the trust document. For instance, the settlor may cross out the name of one beneficiary and replace it with another beneficiary by writing in the replacement's name above the former beneficiary's name. As mentioned, a trust document will commonly require that any amendment be notarized to curb fraud. Yet in reality, the settlor blindly ignores that notarization requirement and forges ahead with the amendment, even though the amendment is on, at best, shaky legal ground per King. This neglect of the notarization requirement can be attributed to the lack of legal training by lay people.

I am not sure what compels a person to engage in this behavior because a person can easily spend $2,000 for a trust and then be unwilling to amend it for a fraction of that cost. The British phrase "penny wise pound foolish" comes to mind.

The obvious takeaway is that if a person decides to amend their trust, it is prudent to retain an attorney to amend it. Otherwise, you can have an estate planning disaster that will end up costing far more than if an attorney had been retained to handle the amendment.

Care Custodian

California law generally prohibits a "care custodian" from being the beneficiary of a decedent's estate. Prob C § 21350(a)(6).

For example, Carl is the in-home attendant for Daniel, an elderly man who lacks the ability to take care of himself independently. Carl would be considered Daniels' care custodian and would generally prohibited be from inheriting through Daniel's estate whether via trust or will. Although if Carl is connected to Daniel through blood, marriage or other means per Prob C § 21351(a), the transfer is permissible. Similarly, if the will or trust "is reviewed by an independent attorney who (1) counsels the client (transferor) about the nature and consequences of the intended transfer, (2) attempts to determine if the intended consequence is the result of fraud, menace, duress, or undue influence, and (3) signs and delivers to the transferor an original certificate" of independent review, the transfer is permissible under this scenario as well.   

The rationale behind the law is that a dependent adult is often in a vulnerable position. He or she relies on the care custodian to assist them with daily life activities such as bathing, dressing, eating, etc. Naturally then, the dependent adult can easily be manipulated by the care custodian because "you do not bite the hand that feeds." This is not to conclude that all care custodians are conniving, rather the law simply reflects a natural consequence of the relationship. A dependent adult is in a vulnerable position.     

A recent superior court case revolved around the issue of a care custodian receiving an inheritance. According to the trial's transcript, William Kuhner wrote a trust in 2006 which left his entire estate to his daughter Donna Martens. In March 2009, Mr. Kuhner was diagnosed with end-stage congestive heart failure which necessitated continuous care. Thereafter, Ms. Martens hired a neighbor of her father's, Annette Rae Robinson, to be the in-home attendant, i.e. the care custodian. 

Mr. Kuhner's condition deteriorated to the point where a physician concluded on May 20, 2009 that he lacked the capacity to handle his finances. Regardless, Ms. Robinson took Mr. Kuhner to various attorneys in hopes of amending the 2006 trust. Furthermore, Ms. Robinson had Mr. Kuhner sign a quitclaim deed which transferred title to her, although the deed was incorrectly drafted as Ms. Robinson did not account for the fact that the home was owned by the trust and not Mr. Kuhner individually. 

According to the unpublished opinion, Ms. Robinson eventually was able to have Mr. Kuhner amend his trust.

"On June 30, 2009, while Robinson was present, Mr. Kuhner executed an amendment to the 2006 Trust (the 2009 Trust Amendment) that disinherited Ms. Martens, made a gift of $20,000 to Robinson, left all of Mr. Kuhner's real and personal property to Ms. Robinson, and made Ms. Robinson the successor trustee upon Mr. Kuhner's death. Mr. Kuhner died on July 14, 2009, two weeks after the 2009 Trust Amendment was executed."    

Ms. Robinson and Ms. Martens then litigated the issue of who was the beneficiary of Mr. Kuhner's estate. The 2006 trust gave the estate to Ms. Martens while the 2009 amendment gave the estate to Ms. Robinson. Eventually, the trial court judged sided with Ms. Martens, as Ms. Robinson was determined to be a care custodian. The decision was then upheld on appeal.

Author's Comment: The unpublished opinion does not cite any facts to support Ms. Robinson's claim that this was a permissible transfer. Her conduct is, at first blush, highly questionable. She seemingly coerced an infirm man to amend to his trust to cut out his daughter, to the benefit of herself, weeks away from dying. Hence I assume that Ms. Robinson's attorney at trial presented some facts to support her case which is not reflected in the unpublished opinion.

Trust Amendment & Trust Modification - King v. Lynch

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.

Modifying an Irrevocable Trust

The Berkeley Court handles probate matters in Alameda County

Though the name suggests otherwise, an irrevocable trust can be modified through a number of ways. A previous post discusses how to amend a revocable trust. The following are permitted methods to change a California irrevocable trust. Most of the methods do require court approval.

1.  All trust beneficiaries consent. Prob C §15403.

This method is generally allowed provided that neither of the following apply (1) "the continuance of the trust is necessary to carry out a material purpose of the trust, the trust cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust.the modification will not" or (2) the trust contains a spendthrift clause.

If neither (1) or (2) apply, the beneficiaries can petition the appropriate probate court for modification. 

One of the problems with this method is that sometimes beneficiaries do not live in the same area or there are beneficiaries that are minors or unborn. Thus, obtaining the consent of all beneficiaries can be a challenge.

2. All trust beneficiaries and the settlor consent. Prob C §15404(a)

Generally speaking, no court order is needed for this method. 

3. At least one beneficiary and the settlor consent. Prob C §15404(b)

This method is allowed provided that the interests of the non-consenting beneficiary or beneficiaries is not substantially impaired.

4. Principal is uneconomically low. Prob C §15408

Following the submission of a petition to the court, if it "determines that the fair market value of the principal of a trust has become so low in relation to the cost of administration that continuation of the trust under its existing terms will defeat or substantially impair the accomplishment of its purposes," modification is permitted.

Or, if the trust principal is $40,000 or less, the trustee is empowered to terminate the trust immediately.

5. Changed circumstances. Prob C §15409

This is most common with charitable trusts as a settlor might name a charity as a trust beneficiary but the charity merges with another charity or dissolves prior to death. For example, assume that Samuel Settlor designates an animal shelter in Los Altos, CA as the sole trust beneficiary. Prior to Samuel's death, the animal shelter dissolves for lack of funds to operate and donates its remaining assets to the animal shelter in Mountain View, CA. Upon Samuel's death, the Mountain View animal shelter would petition the probate court to modify the trust whereby it would become the trust beneficiary because of its connection to the Los Altos animal shelter. 

The legal term for substituting one charity for another to fulfill the settlor's intent in a trust modification case is called "cy pres." Try to incorporate that term into your conversations to either (1) impress your friends, co-workers or family (2) confuse them or (3) raise their ire by using legal jargon in an every day conversation.  

6. Conform the trust to tax laws. Probate Code §§21520-21526

Since a principal reason to write a trust is consideration of tax laws, a trust can be modified to achieve the tax objective the trust was intended to fulfill.

Trustee of a Living Trust

Central Trust Company
Altoona, PA

The term "trustee" is used in many different legal fields. For example, in bankruptcy a trustee is appointed for administering the bankruptcy estate, in the case of a foreclosure the trustee is responsible for handling the property's foreclosure and in the case of a trust, a trustee is required in order to administer the trust. The following are some questions that delve into the topic of a trustee of a trust, whether irrevocable or revocable. 

1. What is a trustee?

A trustee is the legal owner of trust property who administers the trust estate in accordance with the trust's directions. Prob C § 16000. For example, if a trust owns a home and the trustee is John Smith, title to the property would be held, loosely stated, as "John Smith, trustee of the Smith Trust."

2. Who can be a trustee?

A trustee can be a person or natural person. 

In regards to a natural person, such an individual needs to be an adult because minors cannot enter into contracts to sell property.  Wallace v Riley (1937) 23 CA2d 654. 

In terms of a person, a corporation can serve as trustee. Prob C § 300. However, before you list some large financial institution as the trustee, please be aware that corporate trustees require large estates, typically in the millions of dollars, before it undertakes representation as trustee.

  

3. Can I pick myself as trustee?

Yes and this is quite common. Many couples appoint themselves as trustees and name their children as successor trustees.

4. What duties does a trustee?

To list all the duties of a trustee would be a bit much for this post. Please click on this link for a full explanation. Suffice to say there are plenty. 

5. How is a trustee compensated?

Trustee compensation is not a matter of right for the trustee. Thus, the trustee may be entitled to no compensation if so provided by the trust document.

However, a trustee is almost always compensated in reality. Few people are willing to assume a position with all the risks without a reward. The following are various methods used to calculate a trustee's compensation if allowed:

• The trustee is compensated in accordance with a set formula. For example, it is common for a trustee to be compensated 1% of the value of the trust estate annually;
• In the case of a corporate trustee, it has a published fee schedule;
• The trustee is paid a fixed amount per year;
• The trustee is entitled to "reasonable compensation." Probate Code §15681

6. Is trustee compensation considered taxable income?

Yes, income received from acting as a trustee is considered taxable income. Pay your taxes!

7. Can a person refuse the selection as trustee?

Yes, and a person has the right to decline trusteeship even after assuming the position. Prob C § 15640.

8. Can a trustee be removed?

Yes, a trustee can be removed (1) in accordance with the trust instrument (2) by the court on its own motion, or  (3) on petition of a settlor, cotrustee, or beneficiary under Probate Code Section 17200.  Prob C § 15642(a).

9.  Can there be more than one trustee?

Yes, California law permits a trust to have more than one trustee administer it.

10. Does a trustee have to be bonded (see insured)?

No, a trustee need not be bonded unless the trust document requires a bond or a court orders a bond on a finding that the beneficiaries' interests must be protected. Prob C §15602(a)(2). 

11. What are some examples of what not to do as a trustee?

As taken from a prior post:

The trust drafter instructed the trustee, Bank of America, to not allow the trust bank account to exceed the maximum Federal Deposit Insurance Corporation amount. For whatever reason, Bank of America permitted the account to exceed the threshold amount. In particular, the FDIC amount was $10,000 (think 1960s) but the account balance at one time was $49,000. Consequently, Bank of America was held to have breached its fiduciary duty to follow the terms of the trust. Prob C §16000; Estate of Gilmaker (1962) 57 C2d 627.

The trustee was engaged in a real estate dispute with one of the beneficiaries. Since the beneficiary had a combative litigation style, the costs were substantial. In order to cushion the blow of litigation, the trustee decided to sue the beneficiary for elder abuse (the trustee represented an elderly couple), which permitted the recovery of attorney fees. Ultimately, the trustee obtained a judgment against the beneficiary for roughly $700,000 in civil court. The problem was that the trustee incurred fees totaling roughly $1.3 million in the process of obtaining that judgment. Furthermore, the beneficiary filed for bankruptcy subsequent to the judgment. Whoops. The court held that the trustee breached his duty to prudently enforce claims against the trust, since no prudent person would spend $1.3 million to try to collect $700,000. Prob C § 16010; Schwartz v. Labow (2008) 164 CA4th 417.     

12. Can a trustee seek judicial guidance when administering the trust?

Yes, a trustee can petition to appropriate court to seek assistance for the following. Prob C §17200.

• Determining questions of construction of a trust instrument;
• Determining the existence or nonexistence of any immunity, power, privilege, duty, or right;
• Determining the validity of a trust provision;
• Ascertaining beneficiaries and determining to whom property shall pass on termination of the trust, to the extent not specified in the instrument;
• Settling accounts and passing on the trustee's acts, including the exercise of discretionary powers;
• Instructing the trustee;
• Compelling the trustee to submit a report or account to the beneficiary under specified circumstances;
• Granting powers to the trustee;
• Fixing or allowing payment of the trustee's compensation or reviewing its reasonableness;
• Appointing or removing a trustee;
• Accepting the resignation of a trustee;
• Compelling redress of a breach of the trust;
• Modifying or terminating the trust;
• Combining or dividing trusts;
• Amending the trust to qualify a decedent's estate for the federal estate tax charitable deduction;
• Transferring a trust or trust property between jurisdictions;
• Transferring a supervised testamentary trust between counties;
• Removing a testamentary trust from court supervision;

13. Can a trustee terminate a trust?

Yes, a trustee can terminate a trust in certain instances. For example, if the trust's principal dips below $40,000, the trustee has the power to terminate the trust. Prob C § 15408(b).

14. Can a trustee be sued?

Yes. 

Just like any other entity, the trustee can be sued. Moreover, the trustee is the appropriate party to sue, rather than the trust itself. Prob C §16249(a).

15. Can the trustee act as the trust's attorney?

No, a trustee may not represent the trust in court, or propria persona for those Latin-inclined. Ziegler v Nickel (1998) 64 CA4th 545. This means that a trustee would need to hire an attorney to represent the trust in a court case. 

Codicil

The following are situations in which it is suggested that a person have an attorney review their will/trust. This list is not meant to be all-inclusive as there are other situations obviously which necessitate a review of one's estate plan. I have found that most clients update or change their estate plan a few times over their lives as most people encounter similar life-altering situations: inheritance, passing away of a loved one, employment change, etc. 

A. Familial and Personal Matters 

1. Marriage or domestic partnership of client (prenuptial/postnuptial agreements)
2. Death, divorce or separation of spouse (trust administration/probate)
3. Development of long-term, committed unmarried relationship
4. Dissolution of long-term relationship or death of domestic partner
(palimony issue)
5. Birth, adoption, maturity, marriage, divorce, or death of a child or grandchild
6. Death of a beneficiary (anti-lapse issue)
7. Serious illness or incapacity of spouse, domestic partner, child or any other significant beneficiary (conservatorship)
8. Significant change in economic status of spouse, domestic partner, child, or any other significant beneficiary
9. Significant change in relationship between client and any beneficiary
10. Significant change in client's health
11. Client's change of residence to another state or country
12. Change in relationship between client and person named as executor, trustee, or guardian; incapacity, unavailability, or death of same

B. Financial Changes 

1. Significant change in income, net worth, or nature of assets
2. Disposal of specific assets mentioned in will (inheritance)
3. Employment change
4. Change in business interests: new partnerships or corporations; dissolution of partnerships or corporations
5. Acquisition or disposal of property in a different state or country
6. Retirement

Amending a Trust

When individuals or couples write a trust (called a settlor(s)), they often ask me if they can amend or change the trust at a later time. 

For example, the settlor might decide to select a new successor trustee or choose a different beneficiary because the previously-named beneficiary is fabulously wealthy now. The successor trustee is the person who becomes the trustee after the original trustee, usually the settlor, has passed away. Per California law, a settlor may modify the terms of the trust. Prob C § 15402. In every revocable trust there should be a section which specifies how to amend the trust. For example, the trust might say that the amendment has to be in writing and must be delivered to the current trustee. 

A settlor is always free to amend the trust on their own. There is no legal requirement that you hire a lawyer to amend your trust. However most, if not all, people hire an attorney to amend the trust because most people lack experience in drafting legal documents. Thus, they would rather have somebody else do it, an attorney, because an attorney has experience with such. 

The process should only take one or two meetings with the attorney at most because an amendment or amendments typically entail minor rather than major changes. Of note, the most common amendment I have seen and done is for the name of the successor trustee to be changed. The attorney's fee to amend a trust should not substantial.

Another common question related to amending a trust is, "how often do I need to get a trust amended or updated." As a general rule of thumb, you should get your trust updated whenever you undergo a major life change: marriage, divorce, death of a spouse, birth of a child, death of a child, retirement, etc. I remember one client who told me that another attorney told her that she needed to update her trust every year. An attorney who subscribes to that belief is looking to drum up business through the dissemination of inaccurate information to clients. As stated, unless there is some major life change, there is no need to amend your trust. Thus, one can expect to amend a trust maybe once a decade.