Trust Amendments and undue influence

Dear Len & Rosie,

My deceased mother was in the care of my niece who was also trustee of my mother’s trust. My mother modified the trust to give my niece her home, which is worth at least one fifth of the estate. At the time that this was signed my mother was in Hospice and was being given morphine. I think there was undue influence and manipulation. The trust has a no-contest clause and a lawyer my brother consulted with said that the risk is to great for the return. My share is one-fifth of the estate, what is your opinion?

Donald

Dear Donald,

You may have a valid undue influence claim, or even a claim that the trust amendment is invalid due to a lack of capacity on the part of your mother. An undue influence claim rests on a three legged stool consisting of a confidential relationship (your mother trusted and relied on her granddaughter), active procurement (your niece got your mother to amend the trust, hired the lawyer, etc.) and unjust enrichment (she wound up with more than what she would have otherwise). If all three elements of undue influence are met, the burden of proof will shift to your niece to show that she was not really up to no good. You may also have a lack of capacity claim if you can show that your mother was too medicated to understand what she was doing.

The problem, as you have already learned, is the trust’s no-contest clause. No-contest clauses are essentially a “take it or leave it” proposition. If you challenge the validity of your mother’s trust in an attempt to get more than what the trust says, you’re disinherited, but only if you lose. If you win, then the amendment is invalid and the trust goes back to what it said before your mother changed it.

No-contest clauses were so powerful that there was an ongoing debate as to whether or not to allow them. The debate ended last year. As of January 1, 2010, the Legislature updated California’s no-contest clause law, Probate Code sections 21310-21315. Now, filing a contest won’t disinherit you if the judge determines that you had probable cause. In your case means it’s not a contest if, at the time you file your petition, the facts, as known to you, would lead a reasonable person to believe there’s a reasonable likelihood that you’ll win. The effect of the new law is that it leaves it up to the judge to decide whether or not to disinherit you if you contest the trust amendment. There are no jury trials in the Probate Court.

Another point in your favor is that no-contest clauses are strictly construed by the courts. Unless the no-contest clause says that it applies to trust amendments, or the amendment included a no-contest clause of its own, you should be OK.

The other problem with your case may have depends on who did the legal work. If an estate planning attorney met with your mother and prepared the amendment, then he or she will be a neutral witness who will be available to testify as to your mother’s mental capacity and her desires. Your mother wouldn’t be the first dying woman to leave something to a grandchild who helped her live out her last days at home.

What you should do is to get a second opinion from a trusts and estates attorney who actually has experience litigating cases.

Len & Rosie

Problems arise with parents trust

Dear Len & Rosie,

My brother and I are trying to manage my mother and step-father’s estate. The one thing that keeps coming up is that we need a court document specifying that my brother and I are executors of the estate. When we asked the lawyer what we should do he said just have them call him. This is for the IRS, a life insurance company and also a bank. Is it common when the estate is less than $1,000,000.

I should also explain that the Law firm that originally did the living trust closed its doors and another firm took over the trust. My parents found out when they want to make some changes to the trust. When they passed my brother and I were left with a mess. We immediately got a copy of the trust and called the lawyer. I have to say he has not been very helpful and this is that last straw. Should he help us obtain this court document showing that my brother and I are the administrators or can we do this on our own?

James

Dear James,

The court document the bank and insurance company are talking about is called “Letters Testamentary”, which is granted to the executor of a probate estate only after a will has been admitted to probate. Whether or not you need to probate the estate of the survivor of your mother and her husband depends on the size of the probate estate.

By “probate estate” we mean the properties and assets titled solely in the name of the surviving spouse, without any pay-on-death beneficiaries or joint tenants. Assets held within the trust don’t count either, but insurance policies that don’t have designated beneficiaries do count and are subject to probate. If the total probate estate is $150,000 or less, then you and your brother can collect your parents’ various accounts using small estate affidavits under Probate Code section 13101. If the total is more than $150,000, you need to file for probate in most cases.

If your mother and step-father failed to transfer some of their assets into their trust, it may still be possible to avoid probate, depending on the terms of the trust and how each of their non-trust assets are held. Under the right circumstances you may petition the court under an appellate court decision in the case, “Estate of Heggstad”. What the petition comes down to is something like this: “Dear Judge, mom and dad made a trust, and the trust says their home and other assets are trust property, but they never bothered to put everything in the trust the way they should of. So please, judge, please give us an order saying that our parents’ assets are in the trust anyway.”

The first step in trust administration is to review the trust, and each and every asset owned by your mother and step-father that has to be transferred. What has to be done depends on the nature of each asset and how it is titled and whether or not there are any pay-on-death beneficiaries.

This can be tedious if your mother and her husband were not very organized, but it has to be done, and the legal fees for this work are almost never included in the fees lawyers charge to create a trust. You do not have to hire your mother’s old attorney or the one who replaced him or her, but you should sit down with a trusts and estates attorney and review everything.

Len & Rosie