Trust Amendment & Revocation

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Hi, this is Stewart Albertson with Albertson & Davidson. In this video, I want to talk about how we can support the claim, and meet our burden of proof, to show that undue influence took place.

Some of the markers that we look for are the actions by the person that we believe exerted or exercised undue influence over a decedent.  We want to look at this person’s place of business in the decedent’s life when the decedent was still living.  Did this person have control over the decedent’s access to food?  Did they have control over access to medications?  Did they have control over access to going to medical appointments to see physicians?  Did they have control over the financial information of the decedent?

We see these markers and we look at this person and we say, “did they take their place within the decedent’s life, where the decedent relies on them for many things:  their medications, transportation, food?  Did they take that and did they exercise undue pressure over the decedent to get the decedent to create a trust or a will that benefits them, at the expense of other people?”

The more we see these markers, the more that we see the undue pressure, such as a wrongdoer calling up a lawyer that the decedent has never met to make an appointment to create a new trust or a new amendment or a new will or a codicil to that will, to that person driving the decedent to the lawyer, to meeting in the lawyer’s office with the lawyer and the decedent to create the trust, to have multiple emails and texts with the drafting attorney to make sure that the trust or will is drafted according to the decedent’s wishes, those are all things that we see time and time again in these undue influence cases.

One thing that really helps us, in addition to everything I’ve just pointed out is the medical records. Do the medical records show that the decedent suffered from some type of mental incapacity, such as dementia or Alzheimer’s?  It doesn’t have to be dementia or Alzheimer’s, but that’s one we commonly see.  If the decedent is suffering from any mental incapacity issues, and you have all of those other things we’ve talked about, those elements we’ve looked at, where this person is in a position of power, that generally leads us to believe that that person exercised undue influence over this individual. If they’re receiving a lion share of the estate plan, or they are receiving more than they would have, absent the undue influence.

Those are some of the things we look at to determine if we can show undue influence took place during the lifetime of decedent, often shortly before the decedent passed away.

 

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Hi, this is Stewart Albertson with Albertson & Davidson and I want to talk to you about undue influence cases.  What makes a good undue influence case and what makes a not-so-good undue influence case?  And let me just set this out as we meet with lots of people that come into our office saying, “Hey, I want to contest my mom or dad’s trust or their will because I know that my brother Bob exercised undue influence over my parents and I’ve been written out of the will or the trust and I will receive no inheritance and I’ve got the best evidence you’ve ever seen Mr. Albertson, or Mr. Davidson, and we’re going to come in here and we’re just, this is going to be a slam-dunk.  You’re going to have no problem winning this case!”

The type of evidence you need to have a good undue influence case, it’s a high bar.  The burden of proof that’s required for you is high.  It’s not easy to invalidate a trust or a will.  So that begs the question, “OK, well then what makes a good undue influence cases versus a not-so-good undue influence case?”

Well, let’s talk about some of the elements that you need to meet to prove that undue influence did, in fact, take place.  One of the first things we have to show is we have to show that the decedent, your parent in this case, was a vulnerable individual.  We can show that several ways.  The most easy way to show that is that they’re over the age of 65 or they’re a dependent adult.  So if they’re over 65, chances are, you could show that they have some vulnerable to them.  The State of California has addressed financial elder abuse and said, “Look, we see a lot of financial elder abuse happening in our state, so we want to stop that.  And so what we’ve done is we’ve set out some criteria for people to look at.  This, these are the elements that we look to to prove an undue influence claim.”

The other way you can look to see if a person is vulnerable is what if they have some type of a medical issue?  What if they have some diagnosis for dementia or Alzheimer’s or anything of the like that affects their mental cognition?  That is something that also will support the element of the decedent being vulnerable.

We also want to look to other elements.  What about the actions or the tactics of the wrongdoer?  The wrongdoer is the person that exercised undue influence over the decedent.  And a lot of times this is not something that you see that’s nefarious or evil or somebody yelling or screaming at the decedent, it’s actually done in a very nice manner.  And it happens like this:  The wrongdoer comes to the decedent while they’re still living and says, “How come your son, Johnny, doesn’t come visit you anymore?  Oh, you know, I don’t think Johnny cares about you.  It’s too bad that Johnny’s not here to take care of you like I’m taking care of you.”  And it’s just done over time.  And, of course, this person already – the decedent already is vulnerable, because they’re older, over 65 or older, they may have a health issue, and so now you have this person who is doing deceitful actions and tactics to influence the elder that their son Johnny really doesn’t care about them and we see this element time and again in a good undue influence case.

We also want to look to another element and that is what type of authority did the wrongdoer have over the decedent?  And authority can come in many forms.  Authority can be that this is the person’s agent, under their durable power of attorney, or maybe they’re already the trustee of the trust.  They can also be somebody that the decedent relies on for their necessaries of live, such as daily medication.  Somebody to drive them to doctor’s offices.  Somebody to help change their diaper in bed.  Somebody that makes sure that hospice is taking care of them.  Here we see the decedent, the elder, is being very reliable on this person who has this apparent authority over them.

The last element that you want to flush out in a good undue influence case is there is an inequitable result.  This is most easily shown in cases where the decedent had a preexisting estate plan that gave everything equally to all of their children.  And we see this time and again.  And then just before they die, they make a change to that trust that did give everything equally to all their children, and they give everything to one person, either one of their children or the wrongdoer who has come into their life and has now exercised undue influence over them.

So in order to have a good undue influence case, where you can meet the burden of proof which is a high bar in the State of California, you’re going to have to show that the victim was vulnerable, that the wrongdoer used actions or tactics that were deceitful, that the wrongdoer had apparent authority over the decedent, and the results that the wrongdoer got was inequitable.  If you can pull all of those elements together through a totality of the circumstances and showing the evidence, you probably have a good undue influence case.

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Hi, this is Keith Davidson at Albertson & Davidson.  And in this video, I want to discuss step-parents.  And I don’t mean to disparage step-parents, there’s a lot of very good step-parent and step-child relationships out there.  But, there’s also some bad ones.  And a lot of times we’re asked, “Can my step-mom or step-dad, can they change the estate plan after my parent dies?”  So, typically, in this scenario, maybe you have a father who married somebody new and that’s your step-mom.  And then your father passes away and you always thought you had a good relationship with your step-mom, but after your dad passes, things start to get a little strained and awkward and you start to wonder can she actually change the estate?

In some cases, it might actually get downright hostile and maybe the step-mom actually tells you, “I’m changing the estate and I’m leaving it all to my kids and I’m not going to leave your father’s share to you after all.”  And you wonder, can she do that?  And the answer is maybe.  And that’s a typical lawyer answer, right?  But it depends; it depends on what your father did when he planned out his estate.  Or, if he didn’t have any planning at all, that could be a real problem.

So the best case scenario would be if your father had created a trust prior to his death, he has the right to leave assets to step-mom and that’s fine.  But, typically, what you’d want to see is that he left money to step-mom in a trust.  So she can use that money for her care and support during her lifetime, but she can’t change the ultimate distribution of it.  Whatever’s leftover after step-mom passes, has to go to you.  But that only works if your dad created a trust and if he had a trust created that had those type of terms in it that allowed the step-mom to use the assets but not control them.  That required that the assets go to you after death.

If your father didn’t do that, then you probably are not going to be entitled to his share of the estate.  And so what happens a lot of times is, either your father leaves everything to the step-mom, in which case she can do whatever she wants after your father dies, and she can cut you out.  Or, he just doesn’t plan at all and things just pass to the step-mom because it’s in joint tenancy or she’s the beneficiary on life insurance, or whatever the case may be.

So when these things are not planned out and if the assets actually pass to step-mom after your father passes away, then you’re really in trouble, because the step-mom can do whatever she likes.  She becomes the owner of those assets and she can do whatever she wants with them as the owner.

The fact that your father may have had a family home that you grew up in and lived in and has been in the family for decades, the law doesn’t care about that – if your father didn’t plan it out property.  And so that’s really the big question.

So anytime somebody approaches us and says, “Can step-mom change the estate after my father passes away?”  The first question we’re going to have is, “Well, what did your dad have in place?  Did he have a trust?  Did he have a will?  Did he have something that we can look at to see if you, as a child, have any rights to any of those assets?” And if you were to tell us that no, he didn’t have any of those things, then chances are, you’re out of luck.  And that’s a little something about the downfalls of step-parent and step-children relationships when it comes to passing assets.

 

Think the law is always black and white?  Think again…at least when you are thinking of Trust vs. Will capacity.  From a legal perspective, capacity as it relates to Will and Trust creation is confusing—even for us lawyers.  Primarily because California Courts have not always applied consistent standards in evaluating capacity to make a Trust.

Will capacity is an age-old standard that can be broken down into three main elements (See Probate Code Section 6100.5):

  1. The decedent must be able to understand the nature of the testamentary act (i.e., they must know they are creating a Will),
  2. Understand and recollect the nature and situation of their property (not details, but general knowledge of their property), and
  3. Remember and understand their relationship to their relatives and those that will benefit from the Will.

This three-part test is referred to as “Testamentary Capacity,” and it applies only to Wills.  Well it used to apply only to Wills, but Justice Steven C. Suzukawa, of the Second District Court of Appeals, changed that last year with the Court’s ruling in Anderson vs. Hunt.

Before the Anderson decision, it was generally believed that to validly create or amend a Trust, a settlor (the person creating the Trust) must meet the higher burden of contract capacity.  Unlike Testamentary capacity, contract capacity requires a person to understand (See Probate Code Section 812):

  1. The rights, duties and responsibilities created by or affected by the decision,
  2. The probable consequences for the decisionmaker and, the persons affected by the decision,
  3. The significant risks, benefits and reasonable alternatives invoiced in the decision

Testamentary Capacity does not require any of these elements.  In other words, a person can create a Will without knowing the duties and responsibilities it creates or the probable consequences of the decision.  Plus there is no requirement for a decedent to know the reasonable alternatives to creating a Will.  As you can see, contract capacity is a higher standard to meet than is Testamentary Capacity.

In Anderson, the Court decides, for the first time, that the lower standard of Testamentary Capacity can apply to the creation of a Trust amendment where the amendment’s “content and complexity, closely resembles a will or codicil.”  In Anderson, since the Trust amendments at issue merely changed the percentages of the trust estate that the settlor wished each beneficiary to receive, the Court concluded that the amendment was like a Will and, therefore, Testamentary Capacity applied. This is a classic example of bad facts make bad law. This decision has far reaching negative ramifications for Trust amendments. 

THE PROBLEMS WITH ANDERSON

1.         When does a Trust Amendment look like a Will?  Good question to which no one knows the answer.  We know changing a few percentages is enough for a Trust amendment to look like a Will, but what else fits into that category?  How about changing the name of a successor Trustee?  Or changing the powers and duties of the Trustee?

The problem with the Court’s ruling in Anderson is that we don’t know where it stops because what one person may consider a simple amendment, someone else may decide is too complex.  Therefore, what standard must a settlor meet in order to amend his or her Trust?  We can’t be sure which standard is appropriate until a Court (likely several Courts of Appeal) rules on it.

2.         What about other Will formalities?  Wills use the lower test of Testamentary Capacity because Wills also have other formality requirements that do not apply to Trust amendments.  For example, Wills must be in writing, signed by the testator (the person creating the Will), and witnessed by two independent witnesses. 

The witness requirement is unique to Wills.  In California, we do not notarize Wills.  In fact a notary on a Will does not make a Will valid.  Instead, a Will must be witnessed by two disinterested witnesses (meaning two people who are not beneficiaries under the Will).  The policy behind requiring witnesses is to ensure that the Will is signed by the testator without undue influence, duress, fraud or at a time when the testator lacks capacity.  Of course, the witnesses don’t always serve this purpose.  There are times when a Will is witnessed when a testator lacks capacity; but still, the witness requirement provides some safeguard against wrongdoing.

No such safeguard is required of a Trust amendment.  An amendment usually only requires the signature of the settlor.  And while Trust amendments are often notarized, there is no legal requirement that an amendment be notarized—just a single signature of the settlor is sufficient (unless the Trust terms state otherwise, which most don’t).

Since a Trust amendment does not require witnesses, it should be judged using the higher level of contract capacity to be sure it is done properly.  Otherwise, Trust amendments should require at least two witnesses as is required for Wills.  But the Anderson Court can’t have it both ways.  It essentially treats a Trust amendment like a Will, yet does not require all the formalities of a Will.  This is a dangerous precedent.

3.       Is incorporation of the whole Trust in a Trust amendment complex or simple?  Another problem with Anderson arises when the settlor creates a “simple” Trust amendment that includes language in the amendment stating that the original trust (usually signed years before) is once again ratified and confirmed. The original trust is almost always going to be “complex” in nature. So does Testamentary Capacity still apply in a case where an original (and complex) trust is ratified and confirmed in a “simple” Trust amendment? Or does contract capacity apply in that case?  We don’t know the answer to that question.

In the end, Justince Suzukawa’s holding in Anderson does what the Appellate Court seem to do best in Trust and Will law—make it far more confusing.  Good for lawyers who litigate these cases, bad for people trying to put their Will or Trust down on paper (and the beneficiaries whose interest are so easily torn apart).

One of the most obvious features of a revocable living Trust is that you can revoke it.  It’s right there in the name “revocable Trust.”  But you can also amend a revocable Trust because, for a long time, California courts have interpreted the power to revoke (which means to entirely do away with a Trust) as including the lesser power to also amend the Trust.  Sounds reasonable enough.

But that has now changed with the California Court of Appeal’s, Fifth District, ruling in King v. Lynch, which holds that the power to revoke may be different from the power to amend—at least in the way in which each is accomplished.

Prior to 1987, there was no statute that provided the manner in which a Trust revocation could be accomplished.  With the adoption of Probate Code Section 15401, that changed, and the law provided two distinct ways in which to revoke a California Trust: (1) revoke using the manner provided in the Trust instrument, or (2) revoke by any writing (other than a Will) signed by the Settlor and delivered to the trustee during the Settlor’s lifetime.  So if the Trust stated that a revocation required a writing signed and notarized by the Settlor, then you could follow that directive to revoke the Trust.  But you could also simply follow number 2 above and revoke by any writing (other than a Will).  In other words, either manner was available for revocation as long as the Trust did not expressly say that its manner was the exclusive way in which to revoke. 

And it was thought for quite some time that the same rules applied to amending a Trust because under Probate Code Section 15402, it said that the method of amendment is the same and the method of revocation contained in Section 15401.  So you could use the Trust terms to amend, or you could amend by any writing (other than a Will).  Each method was available for amendments as long as the Trust did not expressly say that its method was the only way in which to amend.

But now, Justice Levy has, for the first time, decided that amendment and revocations are not so similar after all.  He holds, under Section 15402 (the amendment language) that a Trust can ONLY be amended by the method specific in the Trust and NOT by any language in Section 15401 that allows any writing other than a Will.  He reaches this decision by quoting the following language of Section 15402:

“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.”

He reasons that the term “unless the trust instrument provides otherwise” means that any Trust that has an amendment method stated in the Trust instrument does “provide otherwise” and therefore the statutory language for revocation under Section 15401 cannot be used for Trust amendments.

It seems like an odd ruling because there is no logical reason why the method of revocation should be any different from the methods available for amendments. 

Whatever may be in the Court’s mind, we now have a ruling that says the methods available to amend a Trust are different from the methods available to revoke.  Something good to keep in mind when amending a Trust…or when contesting an amendment to a Trust…food for thought.

We spend a great deal of our time as Trust and Will lawyers pleading with people to create a Will or a Trust as part of their estate plan.  But we rarely discuss how to get rid of those documents if the need ever arises.  The process, called “revocation,” can be a bit more difficult than you might think.

Revoking a California Will

Will revocation is an area of the law unto itself.  In California, there are two options to revoke a Will: (1) create a new Will that specifically revokes the old one, or (2) destroy the original Will by a physical act.  The options for revoking a Will can be found at California Probate Code Section 6120. 

Revocation by a New Will

The first option is the easier and most used of the two.  Whenever you create a Will you typically will find language at the beginning of the documents that says something to the effect of “I hereby revoke all prior Wills.”  This simple sentence is enough to revoke a prior Will; PROVIDED THAT, the new Will is signed with all the proper formalities required of a valid California Will.  In other words, a new, valid Will can revoke a prior Will.

This is true even if the above sentence is not included in the new Will, if the new Will makes provisions that are different and conflicting with the first Will.  So if you give your diamond ring to your daughter in Will one, but then create a new Will leaving the same ring to your son, then the new Will controls and effectively revokes the gifts in the prior Will.  Of course, you never want to rely on an inconsistency—it’s far better to clearly state what you want to have happen to the first Will.

Revocation by Physical Act

A writing is not the only way to revoke a California Will.  You can also do so by a physical act, such as burning, tearing, canceling, obliterating or destroying the Will.  The catch is (1) the physical act must be done by the Testator (that’s the person who created the Will), or at least in the Testator’s presence and at his or her direction.  Once the physical act takes place, the Will is revoked.

Revoking a California Trust

Revocation of a Trust is a bit different from a Will.  And Trust revocation always starts with the Trust document itself because most Trust documents state the method of revocation.

For example, a very common provision in a Trust allows revocation using the following language: “I reserve the right to amend this Trust by a signed writing delivered to the Trustee.”  That sentence, simple as it is, provides the basis for an amendment.  If the Trust is silent as to amendment, then the probate code provides the method to revoke at Section 15401(a)(2), which is a writing (other than a Will) signed by the settlor and delivered to the trustee—a very simple requirement.  Notice that the writing does not have to be notarized or witnessed, it just has to be a writing, signed by the Settlor and delivered to the Trustee.

Of course, a Trust can also be revoked as to a particular piece of property by the Settlor’s act of taking the property out of the Trust.  For example, if I create a Trust and transfer my house into the Trust name, I can revoke the Trust as to that asset by filing a new deed transferring my house out of the Trust.  The Trust then ceases to act over that asset.  That doesn’t necessarily mean that it won’t get put back into the Trust at some point, but once transferred out of the Trust, the Trust no longer controls that assets.

The bottom line: revoking a California Will or Trust is not difficult, but there are a few hoops to jump through if your going to do a proper revocation.