trustees v. remainder beneficiaries, and the struggle to...

Trustees v. Remainder Beneficiaries,

and the Struggle to Deal with an

Aging Population

Bar Association of San Francisco

Tuesday, November 7, 2017

12:00 p.m. – 1:15 p.m.

BASF Conference Center

301 Battery Street, 3rd Floor

“PROBATE CODE §16062 -

DUTY TO ACCOUNT”

Probate Code §16062 - Duty to Account

Except as otherwise provided in this section and in

Section 16064, the trustee shall account:

. . . to each beneficiary to whom income or principal is

required or authorized in the trustee's discretion to be

currently distributed.

- at least annually

- at the termination of the trust

- upon a change of trustee

Contingent and Remainder Beneficiaries:

There is no statutory requirement to account to

contingent or remainder beneficiaries.

The trustee may be required by the terms of the trust or

by court order, or may choose to account…

Evangelho v. Presoto Evangelho v. Presoto (1998) 67 Cal.App.4th 615 [79 Cal.Rptr.2d

146] (hereafter “Evangelho”).

In Evangelho, the First District Court of Appeal held that while a settlor holding a power to revoke is alive, a trustee has no duty to account to a contingent remainder beneficiary of the trust.

However, once the settlor dies, according to the First District’s interpretation of Probate Code section 15800, the right to compel an accounting passes to the remainder beneficiaries.

In other words, under Evangelho, once remainder beneficiaries’ rights vest, they have standing to inquire into the trustee’s conduct occurring during the settlor’s lifetime.

Evangelho (cont’d)

In Evangelho, the decedent’s husband was killed in a car accident, which also left her seriously injured.

Following the accident, the decedent executed a trust and one of her daughters became the trustee.

From the time of the accident until her death six years later, the decedent was “not in the best of health.”

The other trust beneficiaries, the trustee’s siblings, petitioned for an accounting, alleging that the trustee had diverted trust funds to a joint tenancy bank account she controlled, and had engaged in other improper conduct concerning trust assets.


The probate court ordered the trustee to account for trust funds and transactions involving the bank account, including for the period prior to the settlor’s death.

The First District Court of Appeal affirmed.

The First District construed Probate Code sections 15800 and 16064(b) (now section 16069) to restrict the rights of remainder beneficiaries only with regard to when those rights ripen, that is, the time at which the beneficiaries may bring an action for an accounting or to challenge the actions of a trustee during the time the trust was revocable.


Based on this interpretation of the statutes, the First District found that the limitations of the remainder beneficiaries’ rights under section 15800 were lifted upon the death of the settlor.

After that time, and upon the trust becoming irrevocable, the beneficiaries could obtain an accounting for the entire period during which the trustee administered the trust.

According to the First District in Evangelho, the rights of the contingent beneficiaries stretched back to at least the time that the trustee began administering the trust.


In ruling that an accounting was available for the period prior to the trust becoming irrevocable, the First District catalogued what it viewed as evidence of the trustee’s alleged “improper acts,” and these allegations apparently formed the basis for the order.

Specifically, the First District was so concerned with evidence of “improper acts” by the trustee that it conflated its analysis of the remainder beneficiaries’ standing with its analysis of whether the trustee might have harmed those “ultimate beneficiaries” during the period that the trust remained revocable by the settlor.


But the First District cited no statutory authority for conflating these issues, referring instead only to a court’s “broad equitable powers for the protection of beneficiaries.”

In sum, the First District found that Probate Code section 15800 refers to rights existing “during the time that a trust is revocable.” The statute may be ambiguous as to whether a remainder beneficiary may retroactively demand an accounting for the time when the trust was revocable. Evangelho resolved that apparent ambiguity to allow for such a demand.

- 16060 - DUTY TO INFORM

PROBATE CODE § 16060

Probate Code § 16060

The trustee has a duty to keep the beneficiaries of the trust (as defined in Prob. Code §24) reasonably informed of the trust and its administration.

Beneficiaries include remainder beneficiaries who may not otherwise be entitled to an account under Probate Code §16062.

The California Law Revision Commission Comment to Probate Code §16060 states: "The trustee is under a duty to communicate to the beneficiary information that is reasonably necessary to enable the beneficiary to enforce the beneficiary's rights under the trust or redress a breach of trust."

Salter v. Lerner

Salter v. Lerner (2009) 176 Cal. App. 4th 1184, 1188

(hereafter “Salter”).

In Salter, the First District held that "[t]he duty to

provide information under §16060 is independent of,

and potentially broader than, the duty to account

under Probate Code §16062." (Salter v. Lerner

(2009) 176 Cal. App. 4th 1184, 1188.)

Salter (cont’d)

Glen and Elsa have been happily married for several years. It is the second marriage for each of them, and both Glen and Elsa have children from prior marriages. Elsa dies. Elsa’s interest in her trust estate passes to a Bypass Trust and a QTIP Trust.

Elsa’s trust agreement provides that “any reports or accounts otherwise required by the California Probate Code are hereby waived to the fullest extent of the law.” Glen is the sole successor trustee. Glen is also the sole present beneficiary, and is entitled to all income and has broad discretion to invade principal.

Salter (cont’d)

Elsa’s children from her first marriage never liked Glen. The children write a letter to Glen asking for “confirmation that the trust has been divided into the required subtrusts” and requesting “information as to the allocation of assets among the subtrusts as required by the terms of the trust.” Glen refuses to provide any information on the ground that the waiver provision provides him the right to administer the trust without the scrutiny of the remainder beneficiaries. Elsa’s children petition the court demanding that Glen be instructed to “provide complete, accurate and sufficient information regarding trust matters in the administration of the trust” for the period from the date of death through the date of the petition, which was filed nearly two years later. Has Glen breached his fiduciary duty by not providing the requested information?

Salter (cont’d)

The children attempted to find out by filing a safe harbor application, regarding a proposed petition against Glen seeking information regarding his conduct as trustee of the trust.

The trial court found that the proposed petition would not violate the no contest clause.

The First District affirmed, holding that the proposed petition to compel Glen to provide information is proper. The request for information reasonably necessary to allow the remainder beneficiaries to enforce their rights under the trust falls under Section 16060, which is nonwaivable.

In sum, Glen was ordered to provide the requested information.

Salter (cont’d)

There is a reasonable argument that this duty cannot be waived by the trust instrument.

Whereas Probate Code §16062 (accounts) start with the limiting clause "except as" provided in §16064 (regarding waivers), Probate Code §16060 contains no such provision.

Additionally, the Law Revision Commission Comments to Probate Code § 16062 refers to the exceptions under Probate Code §16064, but the Comment to Probate Code §16060 makes no reference to any waiver.

Is 16060 an “affirmative duty” on the part of

the trustee?

The trustee has a duty to keep the beneficiaries of the trust (as defined in Prob. Code §24) reasonably informed of the trust and its administration.

The California Law Revision Commission Comment to Probate Code §16060 states: "The trustee is under a duty to communicate to the beneficiary information that is reasonably necessary to enable the beneficiary to enforce the beneficiary's rights under the trust or redress a breach of trust."

Williamson v. Brooks (2017) 7 Cal.App.5th 1294; 213 Cal.Rptr.3d 388

[filed January 31, 2017, modified on February 28, 2017]

Settlor established an irrevocable subtrust for beneficiary. Beneficiary was informed of the trust shortly after it was created. Beneficiary knew who the trustees were. Thereafter, beneficiary sold her house at a loss. Beneficiary subsequently sued the trustees for failing to inform her of the trust and the trust assets, as she would have sought a distribution to prevent the loss of her home.

The Court held that, first, beneficiary was informed about the trust, and hence had the opportunity to request more information. Second, although trustees may be held liable for losses incurred by a trust, they are not liable for personal damages suffered by beneficiaries, or opportunities lost as a result of not distributing assets. Third, when the beneficiary asked for “information” about the trust, the trustees responded. The most basic action of the trustee is to inform the beneficiary of the trust, so that the beneficiary may exercise their rights to secure information. It was the beneficiary’s lack of due diligence that prevented her from learning information earlier.

- 16061 - DUTY TO REPORT

PROBATE CODE § 16061


Unless it is during the period in which a trust is

revocable (see Probate Code section 15800) or if

the trustee and beneficiary are the same person, a

trustee shall report to a beneficiary by providing

information requested relative to the administration

of the trust and the beneficiary’s interest.

The trustee has 60 days from the time of the request

to provide a report. (Prob. Code § 17200(b)(7)(B).)

Esslinger v. Cummins Esslinger v. Cummins (2006) 144 Cal.App.4th 517 [50 Cal.Rptr.3d

538] (hereafter “Esslinger”).

In Esslinger, a remainder beneficiary asked the trustee to produce trust documents and to account. After sixty days had passed, the beneficiary filed a petition under Probate Code section 17200(b)(7) asking the court to direct the trustee to account for the preceding 7-year period, later amended to a 4-year period. The trial court ordered the trustee to prepare formal accounts for the 4-year period.

The Fourth District Court of Appeal affirmed, holding that although the trustee had no statutory duty to account to the remainder beneficiary under Probate Code section 16062, the beneficiary was entitled to request information under Probate Code section 16061, and, if the trustee did not reasonably comply, to petition under Probate Code section17200(b)(7) to compel an account.

Esslinger (cont’d)

In so ruling, the Fourth District referenced the Law Revision Commission Comments to Probate Code section 16061 (“A beneficiary who is not entitled to an annual account under Section 16062 may be entitled to information or a particular account under this section.”).

As cited by Esslinger, Probate Code section 17200(a) grants a trust beneficiary standing to petition the probate court “concerning the internal affairs of the trust.”

Section 17200(b)(7), in turn, defines “internal affairs of the trust” to include a proceeding “[c]ompelling the trustee to report information about the trust or account to the beneficiary.”


In such circumstances, the beneficiary may petition the court to compel the trustee to account only if “the trustee has failed to submit a requested report or account within 60 days after written request of the beneficiary and no report or account has been made within six months preceding the request.”

In Esslinger, in granting the relief requested, the Fourth District applied Probate Code section 24, which defines the “beneficiary” of a trust to include “a person who has any present or future interest, vested or contingent.”


In contrast to the opinion by the First District in Evangelho, in Esslinger, the Fourth District made no reference to any evidence or allegations of wrongdoing by the trustee.

It simply ruled that the remainder beneficiaries are entitled to an accounting upon request.

In doing so, the Court effectively ignored the language in section 16062 granting the right to a statutory accounting only to “each beneficiary to whom income or principal is required or authorized in the trustee’s discretion to be currently distributed.”


Esslinger, like Evangelho before it, sought to ensure that remainder beneficiaries’ rights were sufficiently protected, by apparently bestowing on those beneficiaries rights above and beyond the rights provided by the Legislature.

The courts’ desire to encourage greater disclosure to beneficiaries is understandable, and a laudable goal.

But by disregarding the Legislature’s limits on beneficiaries’ rights, the courts have created a regime in which trustees may lack certainty as to their obligations.

Exceptions to § § 16062 and 16061

§ 16069. The trustee is not required to account to

the beneficiary, provide the terms of the trust to a beneficiary, or provide requested information to

the beneficiary pursuant to Section 16061, in any

of the following circumstances:

(a) In the case of a beneficiary of a revocable

trust, as provided in Section 15800, for the period

when the trust may be revoked.

(b) If the beneficiary and the trustee are the

same person.


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 revocable and the person holding the power to revoke the trust is competent:

(a) The person holding the power to revoke, and not the beneficiary, has the rights afforded beneficiaries under this division.

(b) The duties of the trustee are owed to the person holding the power to revoke.

Estate of Giraldin Estate of Giraldin (2012) 55 Cal.4th 1058

(hereafter, “Giraldin”).

The California Supreme Court held that that

remainder beneficiaries have standing to sue a

trustee for breaches of fiduciary duty owed to

the settlor occurring during the settlor’s lifetime,

because those breaches could substantially

harm the remainder beneficiaries by reducing

the trust’s value against the settlor’s wishes.

Giraldin (cont’d)

Giraldin involved a somewhat particular set of facts, in that a trust’s remainder beneficiaries alleged only that the non-settlor trustee had breached his fiduciary duties to the then-living settlor, and did not allege that the trustee had committed elder abuse or exerted undue influence upon the settlor.

Decedent had a wife and collectively they had nine children.

In 2002, Decedent created a revocable trust, designating one son as trustee.

After the death of Decedent and Decedent’s wife the trust was to be split equally between the nine children.

Giraldin (cont’d)

The trustee son, on the settlor’s written directions, invested trust funds totaling approximately $4 million into a startup company named SafeTzone, which was funded by the trustee’s brother.

The money was invested and stock in the company was transferred to the trust. The investment turned out to be a poor investment.

Following the settlor’s death, four of the children brought a breach of trust action against the trustee, but before the wife’s death, alleging the trustee squandered Decedent’s life savings for the benefit of the two sons who owned company, depriving the other children of their benefits.

They sought to remove the trustee and to compel him to account for his actions as trustee, and through an amended petition, they claimed the trustee should be surcharged for breaches of his fiduciary duties regarding the investment in SafeTzone.

Giraldin (cont’d)

Following a bench trial, the trial court ruled in favor of the remainder beneficiaries alleging the trustee should be held liable.

Specifically, the trial court found that the trustee had breached his fiduciary duties in various respects, removed him, ordered that he account, and ordered that he be surcharged in excess of $4 million for the SafeTzone investment.

The trustee appealed to the Fourth District Court of Appeal, which reversed the trial court on the basis that the remainder beneficiaries lacked standing to sue for alleged breaches of fiduciary duty during the settlor’s lifetime.

Giraldin (cont’d)

The Fourth District, in reaching its conclusion, reasoned that the remainder beneficiaries never alleged that the trustee engaged in misrepresentation or any conduct amounting to elder abuse in his dealings with the settlor, or that he was guilty of subjecting the settlor to undue influence.

In fact, to the contrary, the remainder beneficiaries conceded that the settlor intended to make the investment in the startup company and that his free will was not overcome by the trustee (i.e., he was not unduly influenced or subject to elder abuse).

Giraldin (cont’d)

On December 20, 2012, approximately one year after it granted review of Giraldin, the California Supreme Court reversed the Fourth District, finding that the remainder beneficiaries did have standing to sue Timothy for breaches of fiduciary duty owed to William occurring during William’s lifetime, because those breaches could substantially harm the remainder beneficiaries by reducing the trust’s value against the settlor’s wishes.

The California Supreme Court analyzed Probate Code section 15800, reasoning reasoned that although section 15800 provides that any fiduciary duty was owed by the trustee only to the settlor while he was alive, the effect of the statute is merely to postpone the remainder beneficiaries’ enjoyment of their rights until after the settlor’s death.

Giraldin (cont’d)

The California Supreme Court further reasoned that “[n]othing in section 15800 limits the ability of beneficiaries to petition the court after the trust becomes irrevocable[,]” i.e. after the settlor’s death or incapacity.

However, pursuant to Johnson v. Kotyck, a case mentioned in Giraldin, a beneficiary of a revocable trust cannot petition to compel an accounting while the settlor is living even where the settlor is subject to a conservatorship; rather, only the conservator has standing to do so because he or she is the one holding the power to revoke the trust by means of a substituted judgment. (Johnson v. Kotyck (1999) 76 Cal.App.4th 83, 90).

Giraldin (cont’d)

Nonetheless, in reaching its holding in Giraldin, the

California Supreme Court also analyzed, and to a

certain extent relied upon, Evangelho, supra, which

the Court determined was the only California court

case on point that found standing in similar

circumstances.

Protection of the Elderly?

In Giraldin, the California Supreme Court

acknowledged that standing to sue for elder abuse

or as a representative of the deceased settlor under

Code of Civil Procedure section 377.30 (survival of

decedent’s cause of action) is already available

under current law.

However, with respect to an elder abuse claim, the

Court observed that nothing in the Welfare and

Institutions Code suggests that such a claim

replaces all other possible actions (e.g., claims for

breach of fiduciary duty).

Protection of the Elderly? (cont’d)

With respect to section 377.30, the Court further observed that the

deceased’s personal representative may often be the same person

as the trustee, so there would be no incentive to sue in such

circumstances.

While it is true that the remainder beneficiaries could petition to

remove the existing personal representative in such cases, and urge

the new personal representative to file suit, the Supreme Court

questioned why the beneficiaries should have to go through a two-

step process requiring removal and replacement of the alleged

wrongdoer as personal representative before an action could be

commenced.

Remainder beneficiaries should be able to directly file a breach of

duty claim on behalf of the deceased settlor, which is now the

current state of the law under Giraldin.

The Takeaway from Giraldin

Does Giraldin now mean that the trustee of a revocable trust who abides by a settlor’s written directions during the settlor’s lifetime, could face liability to the remainder beneficiaries for abiding by the settlor’s written directions?

According to the California Supreme Court, the answer to this question is “no,” because Probate Code section 16462(a) provides that a trustee of a revocable trust is not liable to a beneficiary for any act performed (or omitted) pursuant to written directions from the settlor.

Therefore, trustees might find solace in that they may be protected from liability to remainder beneficiaries under section 16462(a), so long as they act only pursuant to a settlor’s written instructions.

What did Giraldin omit?

Was Giraldin even necessary?

Probate Code section 9654 – a statute not

mentioned in Giraldin – already confers standing on

the heirs of a decedent to sue “for possession of

property or to quiet title.”

“The heirs or devisees may themselves, or jointly with

the personal representative, maintain an action for

possession of property or to quiet title to property

against any person except the personal

representative.” (Prob. Code § 9654.)

What did Giraldin omit? (cont’d)

At least one court (the Third District Court of Appeal)

has held that claims predicated on “fraud, breach

of fiduciary duty, or other act which entitles the

plaintiff to some relief” are, in effect, an action for

“possession of property.” (Olson v. Toy (1996) 46

Cal.App.4th 818, 823.)

Therefore, standing to sue for fraud or breach of

fiduciary duty is already conferred on heirs and

devisees under Probate Code section 9654.

PLANNING TIPS

GOOD COUNSEL

WRITTEN DIRECTIVES FROM SETTLOR TO TRUSTEE

ALWAYS PREPARE ACCOUNTINGS

(FORMAL V. INFORMAL)

CLINICIANS

EXCULPATORY CLAUSES

Written Directives

Probate Code § 16001(a) and 16462(a)

Referral to Clinician

Clinical Assessments

Clinical issues that must be considered and

relevance of a correct diagnosis.

How can a lawyer identify an appropriate clinician

to make a capacity assessment.

What information should a lawyer provide to a

clinician in making a referral.

What a formal assessment provides.

What information should the lawyer look for in an

assessment report.

Probate Code § 811 & 812

Moore v. Anderson…

Moore v. Anderson Zeigler Disharoon Gallagher &

Gray, (2003) 109 Cal.App.4th 1287 (hereafter,

“Moore”).

In Moore, the First District held that an attorney

preparing a will has no duty to the intended

beneficiaries to investigate, evaluate, ascertain or

maintain the client’s testamentary capacity. The

attorney’s primary duty of loyalty is to the client, and

this duty might be compromised by imposing such a

duty to beneficiaries on the attorney.

Referral to Clinician

Pros and cons of referral to

a clinician for assessment

Absolute Discretion: an Exculpatory Clause

An “exculpatory clause” is a trust provision that

relieves a trustee of liability for breach of trust.

A grant of absolute discretion is considered an

exculpatory clause and is strictly construed. Estate

of Collins (1977) 72 Cal.App.3d 663, 673.

The trustee will have no liability as long as he or she

acts in good faith (or the settlor may purport to

confer “uncontrolled” discretion or to relax the

standard of care to some other lower level).

Exculpatory Provisions are Permitted

While there are no California cases discussing

exculpatory clauses with respect to trust

administration, the statutory authority allowing

exculpatory clauses to limit a trustee’s liability is

recognized by numerous California treatises, including

Witkin, Summary of California Law, Tenth Edition (2005), Trusts, §138, p. 703; 60 Cal. Jur. Trusts, 253;

California Trust and Probate Litigation (CEB 2013) §21.53, p. 760 and §13.5A, p. 404-5; Matthew Bender

Practice Guide; California Trust Litigation (2012) Defending Claim for Breach of Fiduciary Duty, §10.14,

pp. 10-37 to 10-38.

However, Probate Code §16461(b), does not protect

the trustee in cases of intentional breaches, gross

negligence, bad faith, reckless indifference to the

beneficiary’s interest, or profit derived from a trustee’s

breach of trust.

Trustee’s Liability Clause

Sample Provision:

“So long as any individual specifically designated as a successor trustee by the settlors is acting as trustee, the trustee shall not be liable to any beneficiary for the trustee's acts or omissions and the trust shall defend and indemnify the trustee from any and all claims or demands of every kind or character, liability, damages, losses, costs, and expenses including attorney fees and court costs, arising out of the trustee's administration of the trust, except in cases of willful misconduct, bad faith, or gross negligence. The preceding sentence does not relieve the trustee of any obligation to restore to the trust any benefits received by the trustee as a result of a breach of the trust.”

“THE EMPTY CHAIR”

Probate Code Sec. 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

revocable and the person holding the power to

revoke the trust is competent:

(a) The person holding the power to revoke, and not

the beneficiary, has the rights afforded beneficiaries

under this division.

(b) The duties of the trustee are owed to the person

holding the power to revoke.

Law Revision Commission Comments

…postpones the rights of

beneficiaries until the death or

incompetence of the settlor or

other person holding the power to

revoke.

Drake v. Pinkham Drake v. Pinkham (2013) 217 Cal.App.4th 400 (hereafter, Drake”).

The Third District Court of Appeal’s ruling in Drake is in some ways a limitation on or corrective to the holding in Giraldin.

In Drake, a beneficiary alleged that a settlor was incompetent in litigation commenced during the settlor’s lifetime. The case settled without a finding on the issue of the settlor’s competency. The same beneficiary later contested the settlor’s trust amendments after the settlor’s death.

The trial court found that the beneficiary was aware of the existence and terms of the trust amendments at the time of the earlier litigation and that the allegations of incompetency meant that Probate Code section 15800 did not prohibit the beneficiary from contesting the amendments during the settlor’s lifetime. The trial court therefore ruled that several of the actions were barred by the statute of limitations and collateral estoppel.

On appeal, the Third District affirmed, albeit on different grounds, that the actions were barred by the doctrine of laches, and therefore there was no need to consider the statute of limitations and collateral estoppel defenses.

Babbit v. Superior Court

Babbitt v. Superior Court (2016) 246 Cal.App.4th 1135

In Babbitt, a remainder beneficiary – a child from the deceased settlor’s first marriage – demanded an accounting from the surviving settlor (stepmother) for a period including the time in which the trust was revocable

The probate court granted a petition compelling the account.

The 2nd District Court of Appeal issue a write of mandate, holding that the probate court erred in ordering the trustee to account for the “revocable period” because a remainder beneficiary had no right to inquire as to “dissipation” of assets during the period of time in which the trust was revocable.

The Court referenced the “dying cruise voyager” hypothetical from the Giraldin opinion to show that a settlor could spend away the corpus of a revocable trust as he wishes.

Planning Ideas

Account annually

Exculpatory Clauses

Use Clinicians

Ensure there isn’t an “empty chair”

Spousal Fiduciary Duties

Family Code section 721 provides:

(a) Subject to subdivision (b), either spouse may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried.

(b) Except as provided in Sections 143, 144, 146, 16040, and 16047 of the Probate Code, in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following:

(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying.

(2) Rendering upon request, true and full information of all things affecting any transaction that concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions.

(3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse that concerns the community property.

Lintz v. Lintz Lintz v. Lintz (2014) 222 Cal.App.4th 1346 (hereafter,

“Lintz”).

At time of the decedent’s death, he was married to his third wife. He had three children from his two previous marriages, as well as two grandchildren. His third wife had two children from a prior marriage.

At the time he married his third wife, he amended his trust to provided for his children, grandchildren, and a former son-in-law upon his death.

Three months after marrying, the decedent further amended his estate plan so that his third wife would receive half of the trust assets upon his death.

Lintz v. Lintz (cont’d)

The decedent made several more amendments to his trust until his death, each one gradually providing more and more to his third wife and disinheriting his two oldest children.

Ultimately, the decedent and his third wife executed a new revocable trust that designated all the decedent’s property as community property, gave the wife an exclusive life interest in the decedent’s estate, gave the wife the right to disinherit the decedent’s youngest child and leave any unspent residue to the wife’s two children.

The trial court found the wife liable for financial elder abuse, breach of fiduciary duty, and undue influence in the procurement of the documents.


The Sixth District Court of Appeal noted the trial court applied the incorrect standard for legal capacity, but affirmed the trial court’s decision.

The Sixth District stated that more complex documents require a higher degree of competence and should be examined pursuant to the provisions of Probate Code sections 810 through 812.

In addition, the Sixth District found the trial court erred in failing to apply a presumption of undue influence against the Wife. Further, the Sixth District stated it is a long-standing rule in California that undue influence can be proved by circumstantial evidence.


Specifically, the Sixth District concluded that the presumption of undue influence when a spouse obtains an advantage under Fam. Code §721 applies when a spouse procures a revocable trust converting separate property to community property and naming the spouse as settlor and trustee.

Notably, the Sixth District did not apply the additional prong of “active procurement” in the traditional 3-part test to find a presumption of undue influence at common law.

Attorney Liability…“Protected Person”

Third Party Beneficiary Exception

Stine v. Dell’Osso

Stine v. Dell’Osso (2014) 230 Cal.App.4th 834 (hereafter, “Stine”).

In Stine, the First District held that a successor conservator may sue the predecessor conservator’s attorneys for legal malpractice.

In 2002, Davis hired Dell’Osso to represent him in connection with a conservatorship of his mother.

In the petition, Davis represented that there were no conservatorship assets, as all assets were held in trust. However, Conservatee had significant assets held outside of her trust.

Dell’Osso knew these assets were assets of the conservatorship and knew Davis had marshaled and controlled the assets. However, Dell’Osso did not petition the court to require a bond.

Davis misappropriated over $1,000,000.

Stine (cont’d)

Although an attorney is normally only liable to the client with whom the attorney stands in

privity of contract, there are two exceptions.

Successor fiduciary exception

Third party beneficiary exception

The court held successor fiduciary exception

applied, without examining the third party

exception.

Stine (cont’d)

Stine’s brief included an extensive discussion of

the factors from the Biakanja case, as well as references to non-California cases, in

advocating for the court to apply liability under

a “protected person” theory.

Biakanja v. Irving (1958) 49 Cal.2d 647 (hereafter, “Biakanja”).

Biakanja provides a balancing test to determine liability to an

intended beneficiary. As modified over the years in California,

and applied in several other jurisdictions, the test involves

balancing the following five factors:

The extent to which the transaction was intended to

affect the plaintiff;

The foreseeability of harm to the plaintiff;

Whether, in fact, the plaintiff suffered harm;

The closeness of the connection between the

negligent act and the injury; and

The public policy in preventing future harm.

Fickett v. Superior Court of Pima County, 558

P.2d 988 (Ariz. Ct. App. 1976)

Schwartz v. Cortelloni, 685 NE 2d 871, 177 Ill. 2d

166, 226 Ill. Dec. 416

Planning Ideas

Know the statutes and cases

we’ve reviewed

Be careful

Document advice in writing

Withdrawal

Conclusion(s)

More information may be better than less.

The trust instrument is, as always, a powerful tool.

Speakers’ Contact Info

Patrick A. Kohlmann, Esq.

Temmerman, Cilley & Kohlmann

2502 Stevens Creek Blvd. San Jose, CA 95128 Tel: (408) 998-9500 Fax: (408) 998-9700

Email: [email protected]

Steven P. Braccini, Esq.

Hopkins & Carley

200 Page Mill Road, Suite 200

Palo Alto, CA 94306

Tel: (650) 804-7600

Fax: (408) 998-4790

E-mail: [email protected]

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