Written by Jeremiah J. Moffit, Esq.,* Courtney A. Sorensen, Esq.,* Craig S. Weinstein, Esq.,* Sara Z. May, Esq.,* and Joubin Hanassab, Esq.
I. A TRUSTEE CAN BE SURCHARGED FOR FEES INCURRED IN DEFENDING AGAINST A TRUST CONTEST, UNLESS THE TRUST STATES THAT THE TRUSTEE CAN USE TRUST FUNDS TO DEFEND THE CONTEST
Zahnleuter v. Mueller (2023) 88 Cal.App.5th 1294
The Third District Court of Appeal held that if a trust does not explicitly state that a trustee may use trust funds to defend against a trust contest, then the trustee must remain neutral in the litigation and cannot favor one beneficiary's interest over another. The Court of Appeal further held that if the trustee improperly defends a trust contest, then the trustee can be surcharged for the amount he incurred in attorneys' fees.
A daughter brought a trust contest seeking to invalidate the last amendment purportedly executed by her father, the settlor. The original trust contained a provision that authorized the trustee to defend, at the expense of the trust, a contest to its provisions, but not to any amendment. The successor trustee under the challenged amendment defended against the trust contest, retaining counsel and litigating the matter in an attempt to uphold the validity of the amendment. The amendment was ultimately deemed to be invalid. The daughter then filed a petition to compel an accounting and to surcharge the trustee for the fees he incurred to defend against the trust contest. The trial court found that the amendment did not authorize the trustee to defend against a contest to the amendment. The trial court surcharged the trustee for the trust funds he used to defend against the contest. The trustee appealed.
The Court of Appeal affirmed. When a trust has more than one beneficiary, a trustee has a duty to deal impartially with each. In litigation concerning the trust, the trustee and the trustee's counsel have a duty to aid the court in deciding on the correct administration of the trust estate, without regard to conflicting interests of the beneficiaries. Here, the trustee improperly favored the interests of the named beneficiaries under the challenged amendment over the interests of the beneficiaries under the prior trust instruments. The trustee's duties did not change just because the trustee did not have a beneficial interest in the amendment. The trustee's failure to participate as a neutral party controlled because the trust did not contain language specifically authorizing the trustee to use trust funds to defend against the contest to the amendment. The trial court correctly surcharged the trustee because the manner in which he litigated the trust contest favored one set of beneficiaries over another violating the duty of impartiality.
II. WHEN A TRUST PROVIDES A SPECIFIC PROCEDURE FOR AMENDING A TRUST, THAT PROCEDURE MUST BE FOLLOWED FOR A SUBSEQUENT AMENDMENT TO BE VALID.
Diaz v. Zuniga (2023) 91 Cal.App.5th 916
The Second District Court of Appeal held that where a trust contains a provision outlining a specific procedure for amending a trust, that procedure must be followed to amend the trust. A trust amendment that did not follow the specific procedure would frustrate the settlor's intent.
A trust required that in order for an amendment to be valid, the settlor was required to deliver an amendment to the trustee by certified mail. The settlor was the trustee during his lifetime. After the settlor's death, an amendment was found in the settlor's closet, signed by the settlor, and in an envelope addressed to his attorney, but never sent via certified mail to the trustee. The co-trustees of the trust petitioned the court for instructions concerning the validity of the amendment. The trial court held that under Probate Code section 15402, the amendment was invalid because it failed to abide by the required procedure to amend the trust. The negatively impacted beneficiaries appealed.
The Court of Appeal affirmed. The Court of Appeal looked at Probate Code section 15401 regarding trust
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revocation and Probate Code section 15402 regarding trust modification. Under section 15401, a trust can be revoked in a writing delivered to the trustee during the settlor's lifetime. Section 15402 states, "unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation." In analyzing these statutes, the Court of Appeal held that the language in section 15402 does not allow for a trust amendment to be prepared using the method for revocation in Probate Code section 15401, if the trust provides for a specific method of modification. Therefore, because the trust provided a specific procedure for amending the trust and the settlor did not follow that procedure by sending the purported amendment to himself via certified mail, the trial court was correct in finding that amendment was invalid. The court noted the division in authority on this issue and the Haggerty case currently pending before the California Supreme Court.01
III. COURTS EXERCISE THEIR INDEPENDENT JUDGMENT IN INTERPRETING BEQUESTS WHERE THERE IS NO EXTRINSIC EVIDENCE REGARDING THE TESTATORS' INTENT
Breathe So. Cal. v. Am. Lung Ass'n (2023) 88 Cal.App.5th 1172
The First District...
