Influence or Undue Influence?

One method to invalidate a revocable transfer on death deed (TOD) is by proving undue influence. Obviously the beneficiary of a TOD will have some influence over the drafter of the TOD. For example, in the case of a child and parent, the child may converse with the parent, care for the parent, buy groceries for the parent, pay bills for the parent, take the dog out for a walk, etc. These interactions between the child and parent certainly give the child influence with the parent. Still, the threshold question is whether the influence is undue or not. If undue influence, the free will of the parent is overcome by the influence of the child. 

A recent unpublished appellate decision articulated the difference between "influence" and "undue influence."

"I find that Ms. Vosburgh influenced Ms. Fries, gave her information regarding, perhaps, Mr. Gribbon's misdeeds from the past; gave Ms. Fries information about the check writing that, again, and I'm not taking this for the truth, but this is information that Ms. Fries received, whether she believed it or not or whether it is true or not, that is not for me to determine, but this is the information she had.      

And I do believe that Ms. Vosburgh informed Ms. Fries of the check writing, that it was Mr. Gribbon who wrote himself checks; that it was Mr. Gribbon who — I'm trying to choose my words regarding the bird. I know there was some argument whether it was stolen, sold, boarded, all of those things, but taken away from Ms. Fries, and she was not happy about that. She did not consent to that.      

And, also, regarding her apartment being emptied when she came home, again, I'm not accepting those as, necessarily, the truth, but . . . that [information] was otherwise provided to Ms. Fries.      

And based on [that] information, and I even thought about this, essentially, whether they be true, whether they be disinformation, misinformation, it was information that she had, and the question is, having [that] information, whether it be true or not, whether it be mis-, dis-, or lies, when she had [the] information, was she of her free mind, her own volition? Did she voluntarily, knowingly, intelligently make a decision to, nonetheless, give both properties to Ms. Vosburgh? And based on the evidence that I have, that Ms. Fries was actually upset with Mr. Gribbon, whether it be the bird, whether it be because of the checks, the emptied out apartment, that she was upset with Mr. Gribbon, she did not want to communicate with Mr. Gribbon, she did not want to — I think one of the . . . statements that was given was she did not want anything to do with Mr. Gribbon, again, whether that be based on truth, misinformation, that's how she felt.      

And based on the feeling, based on the belief, then she did execute a transfer of that deed on her own free will, voluntarily, intelligently, informed, or without duress or coercion, and I do believe that it was. So based on those, I do feel that the Petitioner, Mr. Gribbon, has failed to meet his burden to show that Ms. Fries otherwise executed the [TODs] September 2nd, 2019, that she was under undue influence.      

I believe she was influenced, but whether it was "undue," I do not find that it was."

Gribbon v. Vosburgh, Riverside County Superior Court case no. PRRI2100639; PRRI2200180 

Financial Elder Abuse

Under Welfare & Institutions Code §15610.30(a)(1)–(3), financial elder abuse occurs when an individual

"(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70."

A recent unpublished appellate opinion focused on the issue of financial elder abuse. The trial court ruled that respondent had committed financial elder abuse and awarded the petitioner $318,000 in compensatory damages and $50,000 in punitive damages. The respondent appealed the trial court's ruling of financial elder abuse. The appellate court agreed with the trial court's finding of financial elder abuse.

"From 2015 through 2017, under the guise of providing comfort and care, Baik repeatedly misrepresented to Mr. Tak that the government could seize his condominium before or after his death unless he created a trust. Fearing the loss of his home and worrying about his ability to reside in it for the rest of his life, Mr. Tak acted upon Baik's misinformation to create a trust.

Subsequently, in March 2017, Baik actively facilitated Mr. Tak's creation of the Trust by driving him to We the People and paying Yi for her services. As a result of her efforts, Mr. Tak signed a slew of complicated legal documents, which he could not read or understand. He believed that, by creating the Trust and signing those documents, he was protecting his home from government seizure and ensuring his testamentary wishes would be carried out. Instead, Mr. Tak unwittingly granted Baik the exclusive rights to his entire estate, including his condominium, upon his death. Two months later, Baik quelled any concerns Mr. Tak may have had by assuring him, in writing, that she would carry out his wishes by distributing $100,000 to his church and $50,000 to Hwang when he died. Her actions taken following Mr. Tak's death, however, reflect that this promise was false.

Rather than following Mr. Tak's testamentary wishes, Baik immediately commenced efforts to sell Mr. Tak's condominium as quickly and surreptitiously as possible. Less than two months after his death, she sold the condominium to a distant family member through a closed sale, after initially concealing the transaction from Hwang. Ultimately, through the relationship she formed with Mr. Tak, her campaign of misrepresentations causing him to fear the loss of his home and believe she would carry out his testamentary wishes, and her active efforts to ensure the Trust's creation, Baik pocketed nearly $200,000 from the sale of Mr. Tak's home, as well as $9,700 from his life insurance policy. As a result of her actions, Mr. Tak's wishes remain unfulfilled: Hwang and Mr. Tak's church have been deprived of gifts they would have received had Baik not kept the entirety of his estate.

On this record, we conclude there is substantial evidence to support a finding that Baik took and retained Mr. Tak's property with the intent to defraud and by undue influence. Thus, the trial court did not err by concluding Baik committed financial elder abuse under section 15610.30, subdivision (a)(1) and (3)."

In the Matter of: Grace S. Hwang, Los Angeles County Superior Court case no. B325870

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

Settlement Agreement in a Trust Dispute

Santa Clara Co. Superior Court

Gregge v. Hugill (2016) ___ Cal.App.4th _____
 
In Santa Clara County Superior Court, a disgruntled beneficiary challenged the validity of a trust amendment citing a lack of testamentary capacity and undue influence. The trust provided for multiple beneficiaries but there is only 1 contestant, the disgruntled beneficiary. Just prior to trial, another trust beneficiary agreed to file a disclaimer, conditioned upon the case being dismissed, that arguably undercut the remedy available to the disgruntled beneficiary. The trial court was agreeable to this, citing the importance of familial harmony, and dismisses the matter.

The disgruntled beneficiary then appeals and the appellate court finds reversible error, principally because the disclaimant was a non-party. The opinion noted "a settlement is an agreement among adverse parties, and Bennett did not agree to settle the case." Thus, it was improper for the trial court to dismiss the matter as it deprived the disgruntled beneficiary of the right to litigate the validity of the trust amendment.    

The opinion also notes how the settlor amended his survivor's trust multiple times. 

"In 1997, William amended the survivor’s trust, designating a fixed $900,000 to fund the grandchildren’s trust, to be distributed as stated in the 1990 trust instrument."

"In 2000, William amended the survivor’s trust by eliminating Michael’s five percent residual share and increasing Patrick’s share to 35 percent."

"In 2001, William removed Michael’s children Kathleen and Cameron as beneficiaries of the grandchildren’s trust, but he restored their status one year later."

"In 2005 William again removed Cameron as a grandchildren’s trust beneficiary."

"William executed a final amendment to the survivor’s trust on June 5, 2008, two weeks after he underwent surgery to remove a subdural hematoma. The 2008 amendment restored Michael as a trust beneficiary on equal footing with his siblings, and it restored Cameron as a grandchildren’s trust beneficiary on equal footing with his sister and cousins." 

I would not advise a client to amend their trust this many times unless they agree to a restatement of their trust. The reason being is that if a trust is amended, the heirs and beneficiaries are entitled to a copy of the trust and all the amendments. They could then see how the trust changed over time, possibly because of independent decision-making or the result of an interloper. If a restatement was used, only the restatement would need to be given to heirs and beneficiaries. Hence the heirs and beneficiaries could not piece together how the trust changed over time.

Undue Influence by a Child

A child is free to assist a parent with drafting their estate plan. However, a child cannot exert undue influence on the parent. A recent unpublished opinion involved the latter scenario for the late Elizabeth Plott.

The opening paragraph summarized the case as follows: 

"The probate court invalidated a trust amendment drafted by one of the beneficiaries—a lawyer who effectively disinherited her sibling. There is no credible evidence that the amendment manifests the intent of the beneficiaries' elderly mother. As the trial court found, the evidence "overwhelmingly establishes that the 2007 Trust Amendment is the product of undue influence."  

Key v. Tyler, Los Angeles Co. Superior Court Case # BP131447

The opinion did not present the child, Elizabeth Plott Tyler (appellant), a California attorney, and the estate planning attorney, Allan Cutrow, in a positive light. Tyler & Wilson was Ms. Tyler's law firm and MSK was Mr. Cutrow's law firm.

For example the opinion stated:

"Steege reiterated at trial that Mrs. Plott stated, more than once, that she did not trust appellant. This is because Mrs. Plott wanted to do things her way, but appellant "had her agenda" and would do things differently, which upset Mrs. Plott when she learned of it. Appellant recalled that Mrs. Plott balked at signing checks for appellant's legal bills, provoking appellant to "use[ ] my scary yelling tone." When appellant walked out of the meeting, Mrs. Plott signed the checks. At trial, appellant denied ever raising her voice at Mrs. Plott, which was contradicted by her deposition, when appellant answered, "Yes, I'm sure I did on some occasions."

Later in the opinion: 

"There is no shortage of evidence that appellant actually participated in the preparation of the Trust amendment in 2007, personally and by giving directions to others. Drafts prepared by MSK were sent to Tyler & Wilson, not to Mrs. Plott. During the drafting period, Cutrow did not communicate with Mrs. Plott in person, by telephone, by letter or by e-mail. In February 2007, appellant wrote to Cutrow, "After we left your office last time, my mother told me that she was okay with giving me a controlling interest in the business like we discussed, that she did not want to do that with my sister." Cutrow did not meet alone with Mrs. Plott, to confirm that the drafting instructions he received were what Mrs. Plott wanted, as opposed to what appellant wanted. Tyler & Wilson billing records show that appellant's employee Stajduhar attended both the presigning meeting and the meeting at which the Amendment was executed." 

The opinion mentioned that "the Plott nursing home businesses were sold for $55 million at a probate court auction." Due to the high-net worth of the trust estate, I would expect further appeals.

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.

Naming a Beneficiary

It is seldom a good idea for an attorney to be the beneficiary of a testamentary instrument written by a current or former client. This includes either a trust or will. The crux of such a scenario is the perception that the attorney unduly influenced the client into leaving them an inheritance. In a typical attorney-client relationship, the client will regularly place much trust and confidence in their attorney. For example, the client will disclose very private and sensitive information to them knowing that what they say to the attorney is privileged. The client is thus in a vulnerable position that can be exploited.  

Recently a California attorney, Carl Dimeff, was ordered by a San Diego County Superior Court judge to pay the trust estate of Siv Ljungwe $4.3M. Yes $4.3M. This ruling stemmed from the fact that Ms. Ljungwe had named Mr. Dimeff as the sole beneficiary of her trust and had, in the judge's opinion, procured it through undue influence.

In 2004, Ms. Ljungwe executed a trust which named four charities as co-equal beneficiaries of her estate, (1) SDSU Research Foundation, (2) UNICEF, (3) NPR and (4) Doctors without Borders. Thereafter, family turmoil ensued and Ms. Ljungwe retained Mr. Dimeff to assist with obtaining restraining orders against her husband. Ms. Ljungwe's health also suffered during this time, principally from the death of her adult son in 2004. This caused her to be hospitalized for paranoia and delusions.

Over the next couple of years, Ms. Ljungwe wrote Mr. Dimeff hundreds of personal notes. According to the court opinion, the notes were bizarre and contained sexual innuendo. Eventually Ms. Ljungwe informed Mr. Dimeff that she wanted him to be the sole beneficiary of her trust. Due to a California law that prohibits an attorney from drafting a trust in which he or she is a beneficiary, another attorney, Kirk Miller, wrote the trust.

Following Ms. Ljungwe's death in 2010, the four charities challenged the validity of the 2008 trust in San Diego Superior Court. Each argued that the 2008 trust was basically the product of undue influence and therefore the operative trust should be the 2004 trust (which named them as the beneficiaries). Judge William Nevitt Jr. agreed and ordered that the 2008 trust be invalidated in October 2014. Later in December 2014, Judge Nevitt Jr. assessed damages of $4.3M for Mr. Dimeff to pay Ms. Ljungwe's estate.       

Mr. Dimeff has indicated that he will appeal this decision. Given the gravity of the situation, I know I sure would.

Undue Influence in Estate Planning

Haste makes waste.

Unfortunately when people engage in extremely expedient estate planning, disastrous results can occur. The reason being is that legal issues are not identified and addressed due to a shortage of time. Consequently, the neglected legal issues ultimately materialize and injurious results flow.

An example of extremely expedient estate planning and its attendant disastrous outcome occurred in in the case of Mohr v. Mohr, San Bernardino Superior Court Case # PROPS1100603. According to the unpublished court of appeal opinion stemming from the case:

"Carol Slocum (decedent), the 76-year-old mother of seven children, had emergency surgery on June 26, 2011. She was in a coma for five days thereafter. In late July 2011, she was placed in a rehabilitation facility. After her condition worsened, she was admitted to a hospital emergency facility on August 2, 2011.

After her treating physicians told her she was terminal, decedent decided she needed to see her children as soon as possible. Terry, who lived with decedent, was able to arrange for most of his siblings to be at the hospital on August 3, 2011. He also arranged for a notary public (notary) with a deed to come to the hospital that day. Decedent executed the deed on that date. It served to transfer her residence from her name alone into the names of herself and Terry as joint tenants. Decedent died intestate on August 12, 2011."

Unsurprisingly, Sherri Mohr sued her brother Terri Mohr to invalidate the deed citing undue influence. 

The statement of the trial court's decision, in pertinent part, read:

"Terry brought a notary and a deed to this meeting and did not tell [decedent]. She never had the opportunity to discuss a Grant Deed with an attorney or her other children. [Decedent] knew she was dying. She was so very vulnerable to coercion. The fact that the notary told her it was a Grant Deed really does not overcome the undue influence that was present. [Decedent] knew that she had always wanted her children to share and share alike. When she was presented a document to sign, she signed it without knowing its true impact. Terry had taken advantage of his mother."

Consequently, the trial court ruled in Sherri's favor and this decision was upheld on appeal.

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.......     

No-Contest Clause

A no-contest clause is verbiage found in a testamentary instrument that discourages a beneficiary from challenging the validity of the instrument by causing forfeiture if an unsuccessful challenge is brought. For example, a father writes in his will that his son is to receive only $25,000 from his estate even though his estate is worth millions and the son's siblings, a brother and sister, each receive $250,000. If the disfavored son legally challenges the validity of the will and loses, he may be disinherited completely as a result of the no-contest clause. 

California law has significantly altered the landscape of no-contest clauses. Whereas before the no-contest clause law was expansive, i.e. a beneficiary's unsuccessful attempt to invalidate a will or trust usually resulted in them losing their inheritance. Operative January 1, 2010, California law took a much narrower approach in defining what constituted a "direct challenge" to a no-contest clause. The result is that a beneficiary has more leeway to challenge a no-contest clause.

The California Probate Code Section 21311 states that a no-contest clause shall only be enforced against the following types of contests:

"(1) A direct contest that is brought without probable cause.

(2) A pleading to challenge a transfer of property on the grounds that it was not the transferor’s property at the time of the transfer. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application.

(3) The filing of a creditor’s claim or prosecution of an action based on it. A no contest clause shall only be enforced under this paragraph if the no contest clause expressly provides for that application."

A key change to the no-contest clause law is that the contestant will not be penalized if they had probable cause to bring a challenge. Probable cause "exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery."
Prob C § 2131(b).

From the example above, disfavored son knew that his dad was frail and vulnerable. He was a widower who lived in a large house by himself. He recently had met a much younger and attractive woman at the country club one day. The woman had a reputation as a gold digger amongst club members. The other brother and daughter were largely absent from their father's life. When the disfavored son approached the jezebel, she became infuriated that he had the audacity to wreck her malevolent plans. The woman then told the father of disfavored son's behavior and the father essentially cut said son from his estate since he had been brainwashed by her. When the father passed away, his will provided the woman with millions, the absentee children with $250,000 each and disfavored son with $25,000. Determined that his father was the victim of undue influence, disfavored son challenged the will despite the no-contest clause. Since there was probable cause, disfavored son's inheritance would remain intact even if the lawsuit proved unsuccessful.    

Death and taxes

"In this world nothing can be said to be certain, except death and taxes." Benjamin Franklin, as quoted in a letter to Jean-Baptiste Leroy in 1789.

Given this certainty, taxpayers respond by engaging in various tactics to reduce, minimize, avoid or evade their inevitable taxation. For example, nefarious individuals peddle phoney trusts as methods to ostensibly shield income from taxation.  Unfortunately, the zealotry to which a person pursues avoiding taxation can lead them to believe these crooked arrangements. A wealthy San Diego nursery owner, via her son, fell victim to this scam. The tale of her account unfolded in court as explained below.

Estate of Young (2008) 160 CA4th 62

The late Irma Young was a wealthy nursery owner who had amassed a number of real estate holdings. Through here attorney, Dennis Burns, she devised an estate plan in 1991 which called for the distribution of her estate to her 4 children equally. One peculiar part of her estate plan was that her son, Charles Parker, was only allowed to take his inheritance if he did not have any tax liabilities at the relevant time. This naturally prompts the response that Charles probably had difficulties with paying his taxes.

Charles began to attend asset protection seminars in 1992-1993 and became convinced that creating a land trust was an instrument that could be used to avoid paying taxes. Attorney Burns told her Irma that he believed that such trusts were not legitimate tax avoidance devices. Nevertheless, Charles convinced Irma to retain the individuals selling these trusts. In turn she, according to the court opinion, "paid approximately $30,000 to several persons to prepare such documents, some of whom took the money and did no work."

A total of 8 "tax avoidance" or "land trusts" were created for the 8 parcels of real property owned by Irma. Furthermore, 5 business trusts were created to hold her business interests. Of note, the drafting attorney for the business trusts was the trustee for 4 of them (Author's comment: this is generally a huge no-no in California).   

Later on in 1995, Irma became aware that these trusts were a facade and approached her old attorney to try to rectify the situation. Attorney Burns "asked her if she had gotten involved in one of Charles's schemes, and she said yes. He then told her that he had advised her against that, but she had not listened to him, and he could no longer help her and she should get another attorney." 

In 2000, Irma became acutely ill and she asked her son Stephen Parker to inquire as to status of her estate. Stephen naturally approached Charles who failed to provide him with the necessary information. Stephen then asked R. Richard Evans, the trustee of Irma's "trusts" for a copy of such and he provided Stephen with a copy of one of the land trusts. 

"Stephen told Irma about this and she said Charles and Evans were crooks. In May 2000, she called her four children to the hospital and told them that her plan was that each should share equally in her estate, and asked Charles to verify that that was her intent, which he did."    

"On July 30, 2000, Young died. Stephen was appointed the administrator of her estate. In that capacity, he formally requested that Charles and Evans supply him with business records relating to trusts, disposition of funds or property, and the original irrevocable land trust dated September 27, 1993. They replied that they did not have any such documents except for the 1991 will and inter vivos trust. The trusts had no cash left." (Author's comment: not good).

Ultimately, Stephen successfully sued for undue influence and fraud in the establishment of the trusts. 

One sad reality of this case is that neither Charles nor Evans knew Irma's tax bracket. Charles nonetheless coerced his mother to engage in very questionable and expensive behavior without knowing what benefits would accrue. One would think that knowing the current situation would be very helpful for future planning. For example, if Irma was a high-income individual who paid a lower tax rate than others, a la Warren Buffet or Mitt Romney, then pursuing such an exotic tax arrangement is baffling. The point of tax avoidance is to have a net gain. Yet with Irma, her son caused her to have a net loss, and a massive one at that.   

Breach of Trust

In order to practice law in California, one needs to acquire a license. More particularly, a person needs to acquire a law license. Like any other license granted by the state of California, the license can be stripped from the licensee by the issuing body. Lawyers who lose their license are said to have been "disbarred." Yes lawyers are so special that they get their own word to describe loss of professional status.

Probably the fastest way for a lawyer to lose their license, disbarment, is to steal money from a client. This initially might seem like a difficult task at first blush but often times clients entrust their lawyer with a large some of money. For example, a few years ago, a client asked me to hold $60,000 in an escrow account. Since I was the sole signatory on the account, I could (if I wanted to destroy my professional and personal life) withdraw all the money from said account and expend it for my personal benefit. Since I am writing this post as an active member of the state bar of California, let us just say that the client's money was handled ethically.

Unfortunately some lawyers do not exhibit ethical behavior, commit egregious breaches of trust and suffer disbarment for stealing client money. An example of such is the sordid story of an attorney by the name of Sydney Kirkland, a soon to be former member of the state bar of California.

Jeanette Letman created a revocable trust which named Grover Gordon, a close elderly friend and companion, as sole beneficiary of her trust estate. Ms. Letman amended her trust numerous times and eventually settled on Mr. Gordon and Ms. Kirkland as successor co-trustees. This last amendment occurred on April 14, 2010. It should be noted that an attorney should rarely, if ever, name themselves as trustee because of ethical and legal
constraints. 

Ms. Letman passed away on January 15, 2011 and thereby Mr. Gordon and Ms. Kirkland became co-trustees. According to state bar, the trust bank account when Ms. Letman passed away was $285,730. During her time as trustee, Ms. Kirkland's trusteeship was marked by serious problems. According to a ruling by a San Diego Superior Court judge: "Ms. Kirkland violated numerous fiduciary duties. Ms. Kirkland exercised undue influence. Ms. Kirkland forged a bank statement. Ms. Kirkland forged the signature of Mr. Gordon. Ms. Kirkland prepared a false accounting. Ms. Kirkland misappropriated substantial money and also jewelry and personal property without knowledge or consent of Mr. Gordon."

Ultimately it was found that Ms. Kirkland had misappropriated $275,742.5 of Mr. Gordon's inheritance. Consequently, Ms. Kirkland stipulated to disbarment in light of her wrongful conduct in a January 16, 2013 filing with the state bar court of California. Additionally, Ms. Kirkland faces criminal and possibly civil charges for her actions.

It is obviously difficult to rationalize why an attorney with no discipline record up to that point would act in such a heinous fashion. Lawyers are often entrusted with great sums of money and sometimes attorneys do not follow through on their ethical requirements. Ms. Kirkland is an unfortunate example of that.

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.