It is not uncommon for wealthy families to create trusts so that they can pass assets on to their children without facing significant tax penalties. While beneficiaries are typically granted certain rights with regard to trusts, parties who bear no relation to a trust generally do not have standing to petition the court regarding a trust’s internal affairs. There are exceptions to the general rule, however, as shown in a recent case in which the Supreme Court of California ruled that a person whose status as a beneficiary was eliminated due to fraud, undue influence, or incompetence has standing as well. If you are involved in a dispute regarding a trust, it is prudent to speak to a skillful California probate and trust lawyer to discuss your rights.
History of the Case
It is alleged that the plaintiff was a beneficiary of the subject trust, which was a family trust. The settlor of the trust, who was the plaintiff’s mother, made a series of amendments to the trust that ultimately eliminated the plaintiff’s shares and expressly disinherited her. The settlor died shortly thereafter. The plaintiff then filed a petition arguing that the amendments in which she was disinherited were invalid because the settlor lacked the competence to make such amendments and the amendments were brought about by the fraud and undue influence of her sisters, who were also beneficiaries of the trust.
Reportedly, the sisters objected to the plaintiff’s petition, arguing that as the plaintiff was not a beneficiary or a trustee, she lacked standing. The court adopted this reasoning and dismissed the plaintiff’s petition. The plaintiff appealed, and the appellate court affirmed. She appealed to the Supreme Court of California, which reversed the trial court ruling.
Standing to Challenge the Validity of Amendments to a Trust
The sole issue on review was whether the plaintiff had the standing to assert that the settlor’s amendments were invalid. The court noted that the trial court relied on a provision of the law that stated a trustee or beneficiary might petition the court to determine the existence of a trust or express to concerns about a trust’s internal affairs. Relying on the reference to a trustee or beneficiary, the trial court interpreted the law to mean that anyone who was not a beneficiary or trustee, even those who were wrongfully disinherited, could not pursue such a petition.
The Supreme Court found, however, this narrow interpretation was counter to the intent of the Probate Code and the cases interpreting it. Under the Code, a beneficiary is defined as a person who has any interest in a trust, whether it is present or future, vested or contingent. The court explained that assuming the plaintiff’s claims were true, she was a beneficiary pursuant to this definition.
The court ultimately ruled that, in reading the Probate Code as a whole, claims that trust amendments of provisions were the product of incompetence, fraud, or undue influence should be determined by the probate court if the validity of those claims would make the challenger a beneficiary of the trust. As such, it reversed the trial court ruling.
Confer with a Capable California Probate and Trust Attorney
While there are many benefits to establishing a trust, beneficiaries of trusts are not immune to losses caused by unjust behavior. If you are involved in a dispute over a trust, it is advisable to confer with an attorney as soon as possible. Ethan M. Weisinger is a capable probate and trust litigation lawyer, and if you engage his service, he can help you fight to protect your rights. You can contact Mr. Weisinger at 925-258-2020 or via the form online to set up a conference.
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