How ow Cou ould ld I D I Danc ance wit ith h An Anot other, her, Wh When en I Sa I Saw No Sta w No Standing nding The here? re? Probate Attorneys of San Diego July 17, 2019 Julie R. Woods, Esq. P. Ryan Bowen, Esq. Research Attorney Probate Attorney Contra Costa County Placer County Superior Court Superior Court 1
How ow Cou ould ld I D I Danc ance wit ith h An Anot other, her, Wh When en I Sa I Saw No Sta w No Standing nding The here? re? Probate Attorneys of San Diego July 17, 2019 Julie R. Woods, Esq. P. Ryan Bowen, Esq. Research Attorney Probate Attorney Contra Costa County Placer County Superior Court Superior Court 2
Prob ob. . Cod ode. e. § 15800 15800 “Except to the extent that the trust instrument otherwise provides or where the joint action of the settlor and all beneficiaries is required, during the time that a trust is revoca ocable ble and the person holding the power to revok oke the trust is compet peten ent: (a) The person holding the power to revoke, and not t th the be benefic icia iary , has the rights afforded beneficiaries under this division. (b) The duties of the trustee are owed to the person holding the power to revoke.” • Legislature’s intent: postpone the enjoyment of rights under the trust law by contingent beneficiaries while settlor could revoke or modify a trust. (See Law Revision Commission Comments.) 3
Prob ob. . Cod ode. . § 15 1580 801 a) In any case where the consent of a beneficiary may be given or is required to be given before an action may be taken, during the time that a trust is revocable and the person holding the power to revoke the trust is competent, the person holding the power to revoke, and not the beneficiary, has the power to consent or withhold consent. b) This section does not apply where the joint consent of the settlor and all beneficiaries is required by statute. 4
Speaking of settlor’s po power er to re o revok oke e th the e tr trust ust . . . . . . When do beneficiaries have standing to sue the trustee of a revocable trust? 5
Es Estat tate e of of Gi Giral aldin din (2 (2012) 2) 55 Cal al.4 .4th th 105 058 I wanna hold your hand power to revoke 6
Es Estat tate e of of Gi Giral aldin din (2 (2012) 2) 55 Cal al.4 .4th th 105 058 I wanna hold your hand power to revoke 7
Estate of Giraldin Facts: • Settlor made a revocable trust • Named one of his children as trustee • While settlor was alive, trustee invested over $4 million in his own company that tanked • Settlor’s capacity at the time was questioned • After settlor died, remainder beneficiaries sued trustee for acts that he undertook while settlor was alive 8
Estate of Giraldin Iss ssue: ue: • Do beneficiaries have standing after the settlor’s death to allege the trustee’s breaches of fiduciary duties towards the settlor when settlor was alive? 9
Estate of Giraldin Rel elat ated ed Qu Quest estio ions ns: • When did the beneficiaries have standing to sue the trustee for his breaches of trust? • When settlor was alive? • When settlor was alive and incapacitated? • After settlor died? 10
Estate of Giraldin Premise mise (P (Prob. b. Code, ode, § 154 5401 1 et et seq.): eq.): • For a revocable trust, the beneficiaries’ interests are contingent only because the settlor may eliminate their interests at any time • When settlor dies, the trust becomes irrevocable and the beneficiaries’ interests in the trust vest 11
Estate of Giraldin Premis emise e (Prob. ob. Cod ode, e, § 15800): 00): • If settlor is not the trustee, while settlor is alive, the trustee owes fiduciary duties to the person holding the power to revoke (as settlor would) • Not to the beneficiaries • Trustee only needs to account to the settlor or power-holder, not to the beneficiaries 12
Estate of Giraldin Hel eld: d: ➢ After er the set e settlor tlor di dies es, ben enef efic icia iarie ies s have st e standi ding g to sue e for a breach of the trustee’s duty that was owed to the settlor when set ettlor lor was aliv ive. e. Wh Why: • A trustee’s breach of the fiduciary duty owed to the settlor can substantially harm the beneficiaries by reducing the trust’s value against the settlor’s wishes. • Trustee should not escape responsibility for breaches that settlor did not discover during his life, i.e., trustee should not be rewarded from concealing bad acts from the settlor. 13
How to Spot a Giraldin -type Case Triggers to Look for: ✓ Revocable trust during settlor’s life ✓ Non- settlor trustee during settlor’s life ✓ Alleged breaches of trustee’s duties by remainder beneficiaries ✓ Questions of settlor’s incapacity or undue influence may be relevant ✓ Note: exculpatory clause in trust provisions may be ineffective to cure trustee’s breaches 14
Estate of Giraldin Rela lated ed Authority thority • Pr Prob. b. Code de, , § 1646 462, 2, subd bd. . (a (a) ) – A trustee of a revocable trust is not liable to a beneficiary for any act performed or omitted pursuant to written directions from the person having the power to revoke. • Pr Prob. b. Code de, , § 16069 6069 – Trustee need not account to beneficiaries of a revocable trust for the period when the trust is revocable pursuant to section 15800. 15
Estate of Giraldin Relat lated ed Author orit ity • Evang angelho elho v. Pr Presoto (1998) 8) 67 C Cal.App.4t .App.4th h 615 – After settlor died, beneficiaries of the revocable trust then had standing to petition the trustee for an accounting during the period in which settlor was alive and trustee was acting. • Johnson on v. Koty otyck (1999) ) 76 C Cal.A l.App pp.4th .4th 83 – Trust did not become irrevocable by reason of the settlor’s conservatorship. Conservator held the power to revoke the trust for settlor-conservatee, and thus, remainder beneficiaries were not then entitled to receive a trust accounting; however, the conservator could be liable, for the trustee’s malfeasance, to the remainder beneficiaries after the trust becomes irrevocable. 16
Estate of Giraldin Summar mary y of Issues: es: Wh When en do do conti tinge gent t rem emain inde der ben enef efic icia iari ries es have e standi ding t g to sue th e the e trust stee ee for his is brea eache ches s of trust st aga gain inst the set e settlor? tlor? • When settlor was alive? • Not if he had capacity and power to revoke • When settlor was alive and incapacitated? • Not if someone else with capacity had power to revoke • Conservator, attorney-in-fact, other designee • After settlor died? • Yes, because breaches against settlor harmed the beneficiaries 17
Estate of Giraldin Thought hought Ex Experiment/Practica eriment/Practical l Conseq onseque uence nces: s: • Beneficiaries have different points of view regarding decedent’s intent and desires to maximize their own shares • Potential conflicts of interest • Multiple petitioners with different allegations • Settlement issues 18
Bu But t wha what abo t about ut lac lache hes? s? Can beneficiaries’ inaction during the settlor’s life cause a successful defense of laches because they waited too long to pursue the matter? 19
Drake v. Pinkham (2013) 217 Cal.App.4th 400 Yesterday, all my troubles seemed so far away Now it looks as though they’re here to stay … Suddenly, I’m not half the man I used to be 20
Drake v. Pinkham (2013) 217 Cal.App.4th 400 Yesterday, all my troubles seemed so far away Now it looks as though they’re here to stay … Suddenly, I’m not half the man I used to be 21
Drake v. Pinkham • Petition: After settlor died, beneficiary filed a petition alleging the invalidity of two trust amendments based on lack of capacity and undue influence, breach of trustees’ fiduciary duties, requested that defendants predecease decedent, constructive trust, and damages • Response: affirmative defenses included statutes of limitation, res judicata, and laches • Probate Court affirmed summary judgment on the ground of laches • On appeal, Petitioner raised that she did not delay in asserting her rights because she lacked standing to challenge the validity of the amendments until after the settlor died under Probate Code sections 17200 and 15800 22
Drake v. Pinkham Lac aches: hes: • Unreasonable delay plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay. • Delay is measured from the time plaintiff knew (or should have known) about the alleged claim. • Prejudice may be factual in nature or compromise the presentation of a defense. Prejudice is not presumed; defendant must affirmatively demonstrate it. 23
Recommend
More recommend
