Contesting a Trust in California

In California, an heir or beneficiary can challenge the validity of a trust generally within 120 days of receiving a Probate Code §16061.7 notice.  Probate Code §16061.8. Typically the aggrieved heir or beneficiary will try to invalidate a single trust. It is atypical to see an heir or beneficiary try to invalidate multiple trusts because the circumstances surrounding the execution of multiple trusts do not necessarily overlap. However, a recent unpublished appellate decision involved such a scenario. 

"Before she died in April 2018, Cynthia Bronte executed three revocable trusts to distribute her primary asset, Basiltops, LLC (Basiltops), a pesto sauce company she built. In a 2014 trust, Cynthia left 75 percent of Basiltops to her daughter, Andrea Bronte, and the remainder to her employees. In a 2016 trust, Cynthia completely disinherited Andrea, and left the company entirely to her employees. In a 2018 trust, Cynthia left the company to one specific employee, Rut Gumeta Albarez. Andrea, who had a difficult relationship with her mother and had been estranged up until Cynthia's death, remained disinherited.

Two months after Cynthia's death, Andrea filed a petition to invalidate the 2018 trust, asserting that Cynthia lacked capacity to execute it and she had been the victim of undue influence and financial elder abuse by Albarez. Andrea sought to have the 2014 trust declared as the valid and rightful trust of Cynthia's.

At trial, Albarez's attorney asserted that "Andrea need[ed] to knock out both the 2018 trust and the 2016 trust" in order for the 2014 trust to be valid and operative. That is, if the 2016 trust is valid, Andrea could not take under the 2014 trust. Agreeing that issue would be dispositive, the court bifurcated the trial to first determine the validity of the 2016 trust. Andrea's attorney did not object then, nor did she object at any time over the next two days of the bifurcated trial. Andrea conceded that Cynthia signed and executed the 2016 trust, which disinherited her, but argued Cynthia's subsequent conduct evidenced her intent to revoke the 2016 trust. The trial court found the "overwhelming" evidence demonstrated the 2016 trust was validly executed, Andrea had not met her burden to demonstrate revocation, and accordingly it denied Andrea's request to have Cynthia's estate distributed pursuant to the 2014 trust."

On appeal, the appellate court affirmed the trial court's ruling.

Bronte v. Albarez, San Diego County Superior Court case # 37-2018-00031659-PR-TR-CTL

Undue Influence

In the U.S., a person is generally free to write their trust in a manner they see fit. For example, this person could leave everything to their child or nothing to their child (disinheritance). California does not have a forced heirship scheme whereby a next of kin must be included in the distribution of the estate. Countries that practice civil law, e.g. Germany and Italy, have forced heirship law. Conversely, the U.S. is a common law jurisdiction.

However, the validity of a trust or will can be challenged if the product of "undue influence." For example, a disgruntled father disinherits his son and leaves his entire estate to a "dear friend" significantly younger than him. "California courts have long held that a testamentary document may be set aside if procured by undue influence." David v. Hermann (2005) 129 Cal.App.4th 672, 684. 

Undue influence was the focus of a recent unpublished appellate opinion. One intriguing aspect of the case was that the respondent had apparently engaged in similar behavior with another individual.

 "The court also found that how Uriostegui came to inherit the Prescott family's assets was, as one witness put it, "eerily similar" to how she inherited the Olive Street property from Downen. In particular, Downen wrote letters about her son that were similar to the letters Prescott wrote Gregory. The letters in both cases were written by ailing senior citizens who would soon leave their estates to Uriostegui, asserted the authors were "of sound mind" (as if "to provide support for the gifting of entire estates to a non-family member"), used similar adjectives to described the respective sons ("disrespectful, lying, drug dealing, attributing bad-mouthing to connected family, wishing them both dead, and thieving"), and included "the theme of engendering mistrust to those that would be a natural heir." The court found: "The similarities in language and the resulting isolation [of immediate family members] are all evidence of a common scheme/plan and they also solidify [Uriostegui's] identity as someone capable of exerting the undue influence that she exerted in Prescott's last years."

Another noteworthy characteristic of the case was the methodology of one expert witness. 

"The court also relied on the testimony of Dr. Susan Bernatz, a forensic neuropsychologist, who provided expert testimony on Prescott's testamentary capacity and the indicators of undue influence. Dr. Bernatz analyzed undue influence using a model she developed and referred to by the acronym SCAM (susceptibility, confidential relationship, actions and tactics, and monetary loss)."

Whenever a litigant has the term "scam" associated with them, in whatever fashion, it highly likely will not portray them in a positive light. 

Los Angeles County Superior Court case # 16STPB03890

Witness Credibility

A contested court proceeding typically involves the testimony of witnesses to the event or events in question. One side will naturally have their witnesses which they will use to bolster their argument. Conversely the other side will have their witnesses too. Each side can cross-examine the other's witnesses to undercut their credibility. Ultimately a decision has to be made as to a witness' credibility, i.e. is the witness' testimony a reliable source of information or not. The person entrusted with the responsibility to determine witness credibility is the trial judge. People v. Jackson (2014) 58 Cal.4th 724, 749. 

A recent unpublished appellate decision involved a trial judge making a determination as to witness credibility.

The decedent had allegedly executed a trust and quitclaim deed. The trust named decedent's girlfriend as the remainder beneficiary. Decedent's daughter challenged the validity of the trust and quitclaim deed.

If the trust and quitclaim deed were deemed valid, then decedent's girlfriend would be a beneficiary of decedent's estate. On the other hand, if the documents were deemed invalid, decedent died intestate and his estate would be distributed to his heirs. Decedent's daughter would be an heir. Decedent's girlfriend would not be an heir. Thus, who inherited from decedent's estate turned on whether or not decedent's purported trust was valid or not.

A primary point of contention was whether or not decedent signed the trust and quitclaim deed. Decedent's girlfriend claimed that decedent had signed the trust and quitclaim deed. A forensic document examiner testified that decedent had not signed the trust and quitclaim deed. While the documents reflected a signature, it was not decedent's signature. The trial judge then made the determination that decedent's girlfriend was not a credible witness while the forensic document examiner was a credible witness.

A footnote from the unpublished appellate opinion provides some context for this determination:

The court noted, "namely, [Jozelle] testified at her deposition that she did not know about the [p]urported [t]rust until after [d]ecedent's death, but at the unlawful detainer hearing she testified that [d]ecedent showed her the [p]urported [t]rust; and although [Jozelle] testified during her deposition that she never had any documents pertaining to the title of the [property], she testified during the trial that she helped [d]ecedent prepare the [q]uitclaim [d]eed and wrote portions of it."

Superior Court of San Diego County, Super. Ct. No. 37-2015-00005361-PR-LA-CTL

Statute of Limitations

Timing is everything.

The law is no different.

A person's ability to enforce a legal claim is restricted by timing as well. Even if the litigant has a colorable claim, they must file their claim in a timely manner. This is known as the statute of limitations. The following illustration highlights the importance of the statute of limitations.

Danny Decedent mistakenly signed the wrong trust. His neighbor John Brown had taken an incorrect trust from Danny's file cabinet and gave it to him prior to Danny having the trust notarized at his bank. Danny had drafted many versions of his trust but unfortunately kept them in the same stack of papers. The incorrect trust stated that the sole beneficiary was San Diego State University and the trustee was John Brown. The correct trust stated that the sole beneficiary was Danny's brother Abraham, his next of kin, and John was again the trustee. A short time later, Danny passed away in a tragic hot air balloon accident.

Per Danny's executed trust, John was instructed to sell the home and donate the proceeds to SDSU. He asked Abraham to assist him in cleaning Danny's home because he thought Abraham might want to take some family photos that Danny possessed. The two agreed to meet at Danny's home one weekend morning. 

During the cleaning, Abraham found Danny's revised trust and notes in his file cabinet, stating that this trust was the one to be signed. Abraham took these documents to a local attorney who explained to him that mistake was grounds to set aside a trust.  Walton v Bank of Cal. (1963) 218 CA2d 527, 542. 

Since Abraham was Danny's next of kin, he would inherit Danny's estate if the trust was invalidated, namely through intestate succession. Thereby he definitely had an incentive to contest the trust's validity. Furthermore, and most importantly for this article, the attorney explained to Abraham that the statute of limitations for an action challenging the validity of a trust based on mistake was 5 years, since real property was involved. CCP § 318. Thus, Abraham had a 5-year time window to file an action to invalidate the trust. If Abraham waited too long, e.g. 7 years, his claim would be time-barred and SDSU could file for a dismissal on the grounds that the statute of limitations had expired. This dismissal would be granted even though Abraham had a compelling legal case.

The statute of limitations for various probate and trust claims vary. For example, within 120 days of being admitted to probate, a will contest must be filed (Prob C § 8270); within 4 years a trust contest involving an incompetent settlor must be filed (CCP § 337) and within 3 years a trust contest involving mistake or fraud that deals with personal property must be filed (CCP § 338(d).  

Probate Terms

Probate law has certain terms that have specific legal meanings to them. The following are some of those terms.

Abatement 

Definition: The reduction of testamentary gifts. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent decides to leave $50,000 in his will to his friend Larry Appleton with the balance, known as the residuary, to his other friend Homer Thompson. When John wrote his will, his estate was worth $500,000 in liquid assets. However, when John passed away, due to his profligate spending, his estate was only worth $30,000. California laws on abatement say that Larry is entitled to the remaining $30,000, not Homer. Prob C § 214029(a). However, the default rules of abatement can be altered in a will. Prob C § 21400. 

Ademption 

Definition:  Property that was listed in the person's will that is not in his or her estate at the time of their death. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent states in his will that his friend James Rodgers is to receive his prized red Ferrari 308 GTS, which was featured in the movie National Lampoon's Vacation. (I have watched that movie about a thousand times now). John then sells his Ferrari to pay off his credit debt and passes away in a tragic hot air balloon accident shortly thereafter. John's gift of the Ferrari to James is therefore adeemed. James will then need to prove, in order to inherit replacement property from John's estate, that there is no sufficient proof to conclude that John intended for the gift to fail. Estate of Austin (1980) 113 CA3d 167. For example, James will argue that John sold the car because he intended to pay off his credit card rather than avoid having James inherit his Ferrari.

Beneficiary

Definition: "A person to whom a donative transfer of property is made or that person's successor in interest." Prob C § 24.

Example: John Negligent leaves, in trust, a beach home in Santa Cruz for his nephew Bobby Smithson.

Class gift

Definition: A gift to all individuals matching the description of the class. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent writes a will and leaves his entire estate to his "nieces." When John write his will, he has 4 nieces but at the time of his death he has only 1 niece. Since the devise was to a class of members, rather than individuals, the remaining niece is entitled to inherit the entire estate rather than split the estate with the heirs of the predeceased nieces.

In contrast, a gift made by Katherine Moore in her will to "Carrie D. Griffin and her sister, Anna M. Davis, equally divided" was found not be a class gift.  Estate of Moore (1955) 135 CA2d 122. Thus, Anna could not inherit the entire gift even though Carrie had predeceased Katherine.

Creditor

Definition: "One to whom a debt is owed." Black's Law Dictionary 8th ed. (West Group, 2004)

Example: John Negligent runs over a defenseless old lady in the Santa Cruz mountains on a dark and stormy night. The old lady's family sues sues John for wrongful death and wins. While on appeal, John passes away due to an unforeseen traffic accident. The victim's family is a creditor of John's estate and may assert a creditor's claims during John's probate.

Decedent

Definition: "A dead person." Black's Law Dictionary 8th ed. (West Group, 2004)

Example: Self-explanatory. I will avoid making a potshot at a recently deceased celebrity.

Disclaimer

Definition: "Any writing which declines, refuses, renounces, or disclaims any interest that would otherwise be taken by a beneficiary." Prob C § 265

Example: Homer Thompson is the first named beneficiary of John Negligent's large estate, his uncle. However, Homer has enormous credit card debt and multiple judgments against him. Rather than have his creditors inherit his uncle's estate, Homer disclaims his interest in John's estate so that it transfers to the second named beneficiary. For reference, this is legal. Prob C § 283.

Executor

Definition: An individual nominated in a will to be appointed by the probate court to administer the estate of the decedent's death. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent nominates in his will that Freddy Freebird to be the executor of his will. 

Fiduciary

Definition: A person who is required to act for the benefit of another person, on all matters within the scope of their relationship; one who owes to another the duties of good faith, confidence and candor. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: An executor hires an attorney to handle a decedent's probate. The executor is a fiduciary for the decedent's estate and the attorney is a fiduciary for the executor.

Heir

Definition: Any person, including the surviving spouse, who is entitled to take property of the decedent by intestate succession under this code. Prob C § 44. 

Example: Harry is married to Wendy but the couple decides never to have kids. Harry passes away in a tragic rafting accident on the Colorado River in Arizona. At the time of his passing, Harry did not write his will. Wendy is considered Harry's heir. 

An heir is basically a person's next of kin.

Intestate

Definition: A person who has died without a valid will. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Irwin decides to write a will but can only locate 1 witness, his neighbor, to sign his type-written will. On the way home from having his will countersigned by his neighbor, Irwin is run over by a pizza delivery guy. Irwin has died intestate because a type-written will requires 2 witnesses. Prob C §6110.

Issue

Definition: All his or her lineal descendants of all generations, with the relationship of parent and child at each generation being determined by the definitions of child and parent. Prob C § 50.

Example: Harry and Wendy, a married couple, have two children, Sonny and Denise. Denise then gets married and has a child, Gwynn. Harry then passes away in an unforeseen blender accident. Harry's issue would be considered Sonny, Denise and Gwynn. 

Lapse

Definition: A devise to a beneficiary that fails because the beneficiary has either predeceased the testator or has failed to live until a certain point in time. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: Thomas devises to Bobby his home in Los Altos, CA free and clear, 650 Rosewood Court. Bobby unexpectedly passes away before Thomas succumbs to mortality. Bobby's inheritance is a nullity because he has failed to survive Thomas, namely the gift has "lapsed." 

Minor

Definition: An individual under 18 years of age. Fam C §6500.

Example: Self-explanatory   

No Contest Clause

Definition: A clause in a will or trust that disinherits a beneficiary should they contest a will or trust. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: Thomas writes in his will that his son, his sole heir, shall only receive $10,000 of Thomas' $1,000,000 estate. The remainder of the estate will go to Thomas' drinking buddy Barney. The will also contains a no contest clause which states that Thomas will forfeit his $10,000 inheritance if he chooses to pursue litigation in hopes of overturning the will for whatever reason.

Pretermitted Child

Definition: A will, made by a parent, that fails to account for a child.  Black's Law Dictionary 8th ed. (West Group, 2004).  

Example: Harry writes his will in 2000. In 2002, Harry marries Wendy and they have a child named Doris in 2004. In 2011, Harry passes away after toppling a vending machine after he tried to grab the last Diet Mountain Dew from it. Doris is a pretermitted child because Harry's will does not account for her. In light of this, Doris may be able to claim an intestate share of Harry's estate.

The companion to a pretermitted child case is the pretermitted spouse, in which the husband fails to account for the wife in his will.

Residuary

Definition: A residuary gift is a transfer of property that remains after all specific and general gifts have been satisfied. Prob C §21117(f).

Example: Thomas pens a will with the following stipulations (1) $15,000 to my Uncle Buck (2) $20,000 to my neighbor Al Bundy (3) my Honda Accord to my friend Larry Appleton and (4) the residual to Pancho Villa. When he dies Thomas' estate has (1) $100,000 in cash (2) $300,000 in Exxon Mobil stock (3) a home in Beverly Hills, CA (4) a Honda Accord and (5) a Rolex Oyster Perpetual. 

Villa, as the residual beneficiary is entitled to $65,000 in cash, all the Exxon Mobil stock, Thomas' house and his watch. 

Rule Against Perpetuities 

Definition: A nonvested property interest is invalid unless one of the following conditions is satisfied: 

(a) When the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive or (b) The interest either vests or terminates within 90 years after its creation. 

Example: William Randolph Hearst, the media baron, wrote in his 1951 will that his trustee was to operate his business, which is estimated to be worth billions of dollars, as long as they see fit and without time limit. Due to the rule against perpetuties, the trust is expected to last until 2040. Hearst v Ganzi (2006) 145 CA4th 1195. The reason for this is because by 2040, the trust will have failed to vest or terminate within 21 years of Hearst' death and it will be 90 years since the trust's creation.

Testator
 
Definition: A person who has made a will.Black's Law Dictionary 8th ed. (West Group, 2004).
     
Example: Pretty sure an explanation is not needed here.

Trustee

Definition: One who, having legal title to property, holds it in trust for the benefit of another and owes a fiduciary duty to that beneficiary. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Thomas writes a trust and leaves property to his son Samuel. However, since Samuel is a minor, Thomas entrusts the property to Theo to hold in trust until Samuel becomes an adult.

The list of duties a trustee owes a beneficiary are expansive and there is significant liability involved with this undertaking.

Trustor (or Settlor)

Definition: One who creates a trust. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Every trust has three components, a trustor (or settlor), the person who creates the trust, the trustee, the legal owner of trust property and the beneficiary, the equitable owner of the property.

Trust Contest

A common complaint I hear is that of a disgruntled beneficiary who believes that they have been cheated or defrauded out of their inheritance. Still, litigation in the trust field is not the easiest endeavor. Unlike garden-variety civil litigation such as a breach of contract action, trust litigation is characterized by a few distinguishing features that make it very arduous typically. The following is a brief overview of the characteristics that make trust litigation even more difficult than regular civil litigation.  

Nature of Litigants

In the typical civil litigation case, the plaintiff and defendant lack a connection to each other. Even if the litigants were previously-connected, the onset of litigation will most like sever any ties between the two parties. 

In contrast, the litigants in a trust action are almost always family members. When the litigation ends, eventually, the parties will not be able to part ways and embark on two mutually exclusive paths in life. Instead, the litigants will still remain related. You cannot sever blood ties no matter how hard you try. Thus, these bitter litigants will see each other at every family wedding, holiday, birthday, etc. going forward. Conversely, in regular civil litigation, the plaintiff and defendant will not be connected to each other on the same level as family member litigants. These civil litigants will not frequent the same social circles, or at the very least, not on the same level as family member litigants.

Pyrrhic Victory

A Pyrrhic victory can be loosely applied to many trust litigation matters as litigants can win the battle but ultimately lose the war. The following hypothetical illustrates this point.

Assume in 1982, Samuel created a trust for the sole benefit of his daughter Belinda and named his brother Thomas as trustee. Samuel funds the trust solely with a rental property. Over the years, Belinda becomes increasingly frustrated with Thomas’s handling of the trust property. Thomas does not adequately maintain the roof, lets the plumbing become outdated and rents the unit to yokels who terrorize the neighborhood with their back-country lifestyle habits. 

However, Thomas is operating under a tight budget and has to very carefully expend money on the property. During this time, Thomas never once believed he was acting imprudently. Nevertheless, Belinda sues Thomas as trustee of her father’s trust in Santa Clara Superior Court for breach of trust in 2011.

A significant drawback for Belinda’s suit is that Thomas is obligated to defend the trust as required by California law. Prob C §16011. Consequently, Thomas is allowed to expend trust funds to defend the lawsuit against the trust, namely hire an attorney to defend the suit. Even if Thomas ultimately loses the suit, he could charge the attorney fees to the trust if he acted in good faith. Copley v Copley (1981) 126 CA3d 248. Moreover, if Belinda were to win her lawsuit, it is unlikely that she could recover her attorney fees from the trust. Estate of Gump (1982) 128 CA3d 111. The end result is that Belinda could win the lawsuit but acutely deplete the amount of her inheritance, a Pyrrhic victory, as attorney fees incurred by Thomas’s defense of the suit could take a huge chunk out of the trust as trust actions can easily reach six-figures if a case goes to trial and is appealed.

Cost

As is the case with any litigation matter, legal fees can rack up rather quickly. The cost of discovery, namely depositions and interrogatories, for a trust matter can be quite extensive. For example, a common reason to question the legal validity of a trust is by arguing that the document was product of “undue influence.”

Undue influence is conduct that replaces a person’s will with that of another, causing a disposition different from that which the person would have made if permitted to follow his or her own inclinations. Estate of Baker (1982) 131 CA3d 471, 480. California case law has held that the following are signs of undue influence: (1) provisions that are unnatural, cutting off from any substantial bequests the natural objects of the decedent's bounty; (2) dispositions at variance with the decedent's intentions, expressed before and after the document's execution; (3) relations existing between the chief beneficiaries and the decedent that afforded the former an opportunity to control the testamentary act; (4) a testator whose mental and physical condition was such as to permit a subversion of his or her freedom of will; and (5) a chief beneficiary under the trust who was active in procuring the execution of the instrument.

Thus, if a trust contestant believed that a person’s trust was the result of undue influence, he or she would have to marshal enough evidence to prove the five aforementioned elements of undue influence. This is by no means an easy task because you essentially have to demonstrate the person was fine until a malevolent person came into their life and wrecked their estate plan by altering it. While it is not necessarily difficult to spot undue influence, proving undue influence is another issue. In other words, undue influence is often good in theory but cumbersome in application.