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self-study / Will/Trusts

Top 5 trusts and estates cases of 2021

Ciarán O’Sullivan

Ciarán has litigated trusts and estates disputes in trial and appellate courts since 1998. He is a member of the executive committee of the California Lawyers Association's Trusts and Estates section.

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2021 was a relatively quiet year for published trusts and estates cases, especially compared to the prolific output of the courts in the prior year. In 2020, the California Supreme Court issued no less than two important opinions affecting trusts and estates practitioners: Barefoot v. Jennings confirmed that former beneficiaries of a trust had standing to attack, in the probate courts, later amendments that removed them as beneficiaries; Conservatorship of O.B. announced a new standard of appellate review for trial court orders and judgments based on the "clear and convincing evidence" standard of proof, a decision that will impact a large proportion of trusts and estates appeals.

By contrast, in 2021 the Supreme Court did not issue any estates-related opinions -- LPS conservatorship opinions aside -- and the appellate courts have issued only 18 opinions to date compared to 2020's 27.

This article discusses the author's selection of five of 2021's opinions. A brief summary of every 2021 case issued in this practice area can be found on the California Lawyers Association's website, under the Trusts and Estates section's New Case Alerts.

Breslin v. Breslin , 62 Cal. App. 5th 801 (2nd Dist.)

Where potential trust beneficiaries abstain from participating in court proceedings to determine the beneficiaries of a trust, and are given notice of a mediation at which their rights may be affected but again fail to participate, those "beneficiaries" waive their right to object to the proposed settlement.

This case is notable because some courts and practitioners construe it as conferring on the court the power to order mediation in any trust dispute.

Don Kircher executed a trust that he subsequently restated, naming his nephew David Breslin as successor trustee. The restated trust provided for the residue, which was the bulk of the estate, to be distributed to the "charities listed on Schedule A." Breslin never located the original trust and he never found a Schedule A, but in an estate planning folder he found a document titled "Estates Charities," listing 24 charities. Like any prudent trustee in his position, he filed a petition in the probate court seeking instructions as to the identification of the proper beneficiaries, and served notice of the petition to all heirs, known beneficiaries, and charities. Only three of the charities in question appeared at the hearing, where the court ordered a mediation among the trustee, Kircher's heirs, and those three charities. One of the charities served a notice of the time and date of the mediation to all of the other charities, gave notice of the various continuances of that mediation, and explicitly gave notice of the potential dire consequences of nonparticipation in the mediation, including forfeiture of any interest in the trust.

Certain charities, including the Pacific Legal Foundation and others (the "Pacific parties"), did not participate in the mediation, at which the appearing charities and the heirs reached a global settlement dividing the trust amongst themselves, to the exclusion of the non-appearing charities, and awarding attorney fees. When Breslin sought approval of the settlement the probate court granted it, denying the Pacific parties' objections on the grounds that they did not file a response to Breslin's petition to determine the beneficiaries and did not appear at the mediation.

On appeal, the Pacific parties argued that the court had effected an unjustified forfeiture of their interests by denying them an evidentiary hearing, and that it approved the trustee's breach of fiduciary duty by failing to treat them in the same manner he treated the participating charities. The Court of Appeal disposed of both arguments on essentially the same ground: If the Pacific parties had appeared at the initial probate hearing, for which they received notice, they would have had the opportunity to object to mediation or participate in the outcome. Instead, they waited until after the mediation to finally object to the result reached. The court opined that the due process rights of the parties who ignored multiple notices take second place to those of the parties who responded to the notices, and who spent time and effort complying with the probate court's order for mediation.

The court's lack of sympathy for the arguments of the nonparticipating Pacific parties is underscored by the fact that the trustee subsequently, but prior to the hearing on his petition for approval of the settlement agreement, located the original trust and Schedule A thereto. That schedule in fact listed the same charities as listed on the page he had located. In other words, the settlor had indeed intended to benefit all of those charities, including those who lost their interests by not participating.

The most eye-catching aspect of the opinion was the court's statement that "the court has the power to order parties into mediation," citing as authority only Probate Code Section 17206. The language of Section 17206 is indeed broad and apparently all-encompassing ("The court in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by the petition"), but Breslin is the first case to conclude that the section confers the power to order mediation. The opinion contained no discussion of the implications of this statement in cases where parties objected to going to mediation, or where one or other of the parties lacked the financial means to participate. Only time will tell how this will play out in practice.

Unusually, the Court of Appeal granted a petition for rehearing, but it ultimately re-issued the same opinion, this time with a vigorous dissent. While many anticipated Supreme Court review, it did not come.

The ramifications of Breslin are already being felt by the trusts and estates bar, with some practitioners citing Breslin when asking the court to order the parties to mediation, and some probate courts citing it when ordering mediation sua sponte, sometimes over the objections of the parties. Arguably, Breslin should not be read as conferring an absolute right to order mediation in any trust dispute, as some courts seem to believe, and its holding should be limited to the unusual situation where parties have received notices of trial court proceedings and nevertheless decline to participate in mediations arising therefrom. In fact, Breslin itself said as much: "Had the Pacific parties appeared at the initial probate hearing, for which they received notice, they would have had the opportunity to object to mediation." The Pacific parties' real problem was that they did not participate at all, and thereby gave up the right to object to the mediation and any settlement that arose from it. Fairness and the interests of judicial economy compelled this result, but it should not follow that the court can always order trust litigants to mediation.

Keading v. Keading , 60 Cal. App. 5th 1115 (1st Dist.)

A finding of bad faith is not a prerequisite to an award of double damages under Probate Code Section 859 for financial elder abuse based on a theory of undue influence.

This 1st District Court of Appeal case directly contradicts a recent case from the 2nd District Court of Appeal holding that bad faith was a necessary perquisite for all awards of double damages under Probate Code Section 859.

Following his wife Lucille's death, Lewis Keading amended his trust to treat his two children Hilja and Kenton equally, and executed a power of attorney in favor of Hilja. However, shortly before Lewis' death, as he declined cognitively, his son Kenton had him execute a power of attorney in favor of Kenton, and had Lewis transfer stock to Kenton. Acting under the recently procured power of attorney, Kenton also secretly transferred the family residence to himself and Lewis in joint tenancy and amended the Keadings' trust to remove his sister Hilja as successor trustee.

In the post-death litigation, the trial court declared Kenton's power of attorney (and the transfer deed executed thereunder) invalid, in part, because Lewis executed it individually rather than as trustee. Following trial, the court determined that Lewis' last lucid act was the equalizing amendment, that all subsequent instruments were invalid, and that Kenton exerted undue influence such that the latest power of attorney, the transfer deed, and stock transfer had each resulted from elder abuse. Without making any findings of bad faith, the court awarded double damages under Probate Code Section 859 for financial elder abuse within the meaning of Welfare and Institutions Code Section 15610.30, i.e., undue influence.

Probate Code Section 859 provides for double damages in three scenarios. The first two categories explicitly require a separate finding of bad faith, but the third one -- applying when a person "has taken, concealed, or disposed of the property ... through the commission of elder or dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and Institutions Code," i.e., financial elder abuse based on undue influence -- does not.

In 2019's Levin v. Winston-Levin, 39 Cal. App. 5th 1025, the 2nd District concluded otherwise, stating, "We do not believe the Legislature intended to provide double damages for undue influence without bad faith." By contrast, the Keading court sided with two earlier courts in holding that by specifically requiring findings of bad faith as a prerequisite for damages under the first two prongs of Section of 859, but omitting the need for findings of bad faith for financial elder abuse based on undue influence, the Legislature had made plain that findings of bad faith were not required in the latter scenario. The Supreme Court declined review.

It would appear that Keading, along with the two earlier cases it agreed with, has put to rest any doubt that double damages will be awarded for financial elder abuse based on undue influence. Given that double damages awards are mandatory under the three prongs of Section 859, this case gives would-be elder abusers yet more cause for concern.

Eyford v. Nord , 62 Cal. App. 5th 112 (1st Dist.)

Where a testator's belief, even if irrational or unfounded, is drawn from facts which are shown to exist, the testator was not acting under an insane delusion.

This case underscores the difficulty of establishing that a testamentary disposition is the direct product of a delusion under Probate Code Section 6100.5.

Eyford and Johnson were Kay's grandchildren, with whom she had had a close relationship until the last couple of years of her life. They were beneficiaries of her estate under a prior will. In 2016, Kay executed a trust giving everything to a charity. At various times before executing the trust, Kay made statements to friends that she was disinheriting her granddaughters for reasons that included that they were stealing from her, trying to kill her, had shredded her papers against her will, closed her bank accounts against her will, and had caused the death of their mother, Kay's daughter.

All of Kay's statements were demonstrably false, and the granddaughters had actually shredded Kay's old papers and closed her accounts with her consent, when they were assisting her with organizing her life. A previous attorney Kay had met had declined to execute a trust for her, being concerned about her capacity and fearing that she exhibited signs of confusion and dementia. She had not done well on a mini mental status exam in 2015, and there was evidence that staff at her elder residence believed she had dementia and was "out of it."

Following Kay's death, the granddaughters contested the trust on the basis that Kay had a mental disorder with symptoms including delusions or hallucinations that impacted her testamentary capacity. The parties presented conflicting factual evidence about why Kay ultimately disinherited them and about her mental capacity. Kay's doctors testified that she had exhibited no signs of cognitive decline. The trial court found that at the time Kay executed her trust she did not have a mental health disorder with symptoms including delusions or hallucinations that caused her to disinherit granddaughters, and the trial court's decision was upheld on appeal under the substantial evidence standard of review.

This opinion was greeted with disbelief by many practitioners, given that Kay's "delusions" about her granddaughters' actions and their motivations seemed so obvious. But the decision underscores that a contestant in these circumstances has the burden of establishing that the delusions must exist at the time of making the testamentary instrument, and be the cause of the objectionable disposition. It further emphasizes that even irrational or unfounded beliefs do not amount to delusions if they are drawn from some facts which are shown to exist. Here, the granddaughters had in fact closed Kay's bank accounts and shredded her papers, and circumstances existed from which Kay might have believed, however irrationally, that they were trying to kill her. Thus, Kay's statements about the granddaughters did not qualify as delusions.

Finally, the decision may just be a singular example of the difficulty of obtaining an appellate reversal under the "substantial evidence" standard of review, where the testimony of one witness, even if contradicted, can constitute substantial evidence. Conservatorship of B.C., 6 Cal. App. 5th 1028, 1034 (2016). Kay's treating physicians considered her competent, and that alone supplied the substantial evidence sufficient to support the judgment.

Haggerty v. Thornton , 68 Cal. App. 5th 1003 (4th Dist.)

Unless a trust instrument specifies a particular method of amendment as exclusive, the statutory method of amendment is available.

This case explicitly disagrees with 5th District Court of Appeal's 2012 opinion in King v. Lynch, 204 Cal. App. 4th 1186, which had held that unless the trust provides otherwise, the settlor must utilize the method of amendment provided in the trust.

Bertsch created her trust in 2015, nominating Thornton as her successor trustee. She reserved the right by an acknowledged instrument in writing to revoke or amend the trust or any trust thereunder. In 2016, she amended the trust and nominated Haggerty as her successor trustee and gave her a large residual gift. In 2018, Bertsch again amended the trust, this time excluding Haggerty as a beneficiary and as trustee. The 2018 document was not notarized or acknowledged, and it was in the trustor's handwriting. It instructed her former estate planning attorney Galligan to "place this document with her copy of the trust," and that Galligan "can verify her handwriting."

Upon Bertsch's death, competing petitions by Haggerty and Thornton ensued, with Haggerty arguing that subsequent "amendments" were invalid because there were not notarized and because the trust required such a notarized or acknowledged writing. Thornton and other beneficiaries objected to Haggerty's petition, with Thornton arguing that the term "acknowledged instrument in writing" was ambiguous and did not necessarily require notarization. She argued alternatively that the method of amendment provided in the instrument was not exclusive, and that Bertsch had followed a valid method of amendment under Probate Code Sections 15401 and 15402 by delivering a writing to herself. Without explanation, the probate court held that the 2018 amendment was valid. The Court of Appeal affirmed.

Probate Code Section 15401 provides certain methods of revocation, and Section 15402 states that "unless the trust instrument provides otherwise," the settlor can amend by the same methods. In 2012, the King v. Lynch court had held that this language meant that where the trust provided a method of revocation, it was the exclusive method and must be followed. This was Haggerty's argument.

Here, however, the Court of Appeal took the opposite view, agreeing with the dissent in King v. Lynch and holding that the language of 15402 should be construed as meaning that unless the trust provides that the method of amendment is the exclusive method of amendment, it can also be amended by any valid method listed in Section 15401 -- i.e., the method of modification is the same as the method of revocation, unless the trust explicitly provides otherwise. Because Bertsch had delivered the amendment in a writing to herself, which is a valid method of revocation or amendment under Section 15401, and because the trust did not provide that the method of amendment it provided for was the exclusive method, the Court of Appeal affirmed.

There is now a direct conflict between the 4th District and the 5th District as to the available methods of amendment of trusts, giving rise to uncertainty among practitioners. As of the time of writing a petition for review of Haggerty v. Thornton is pending in the California Supreme Court. If the court does not grant review many practitioners believe that the present uncertainty warrants legislative action.

Conservatorship of Farrant, 67 Cal. App. 5th 370 (2nd Dist.)

There is no right to an evidentiary hearing where there is no offer of proof of contested factual issues.

This case emphasizes the importance of making offers of proof when demanding an evidentiary hearing.

Norma executed a durable power of attorney naming her son, Duane, as her attorney-in-fact. Some years later Angelique was appointed conservator of Norma's person and estate, and she began to investigate Duane's actions as agent under the power of attorney. After the court ordered Duane to prepare a formal accounting for his activities, Angelique objected to the accounting. The court, relying on declarations and affidavits, denied Duane's request for an evidentiary hearing and found that he breached his fiduciary duty by commingling funds and self-dealing. The court surcharged Duane.

On appeal Duane argued that he was not obligated to account in the first place, and that the court abused its discretion in denying him an evidentiary hearing. In affirming, the Court of Appeal stated that it is within the discretion of the probate court to order an accounting, and the only prerequisite is that some relationship exists that requires one. A fiduciary relationship generally requires an accounting, and Duane as agent was a fiduciary and needed to account to the principal, in this case to Norma's conservator. Nor did the court abuse its discretion in denying Duane an evidentiary hearing because Duane failed to show that he had suffered prejudice by the denial. He had made no offer of proof in the trial court of the material facts in dispute or the evidence he would adduce, and thus the Court of Appeal could make no assessment of prejudice.

Litigators are aware that, under a line of cases including Estate of Bennett and Evangelho v. Presoto, they are entitled to an evidentiary hearing where the case turns on disputed facts, and that the court may not decide the case on affidavits or declarations. This case, however, reminds us of the need to go beyond a rote demand for an evidentiary hearing in the caption page of the pleading. Where the court seems disinclined to grant such a hearing and appellate review is contemplated, be sure to place on the record the material facts as to which a dispute exists, and what evidence you will adduce in support of your version of those facts. 

#1095

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