Case Study: Disinherited Spouse Settles for Minimal Sum
The plaintiff in this case — the father of Keystone’s clients — had agreed to his own disinheritance from his spouse’s trust due to the extreme acts of financial waste in which he had engaged to his family’s financial detriment. However, after his spouse died, his tune suddenly changed. He not only refused to vacate the trust property named in the unlawful detainer action filed by Keystone’s clients, but he also retaliated against the clients by filing a civil suit that named them as defendants, seeking to have himself declared the owner of the trust property in which he no longer had any interest.
Read the full case study to discover how Keystone managed to turn the tables in its clients’ favor despite the challenges presented by the plaintiff’s lawsuit.
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“When it comes to the law, there are many legal theories one can try presenting to the court to obtain the result they want,” says Nicole Silverstein, a senior associate at Keystone Law Group. “In this case, however, there was no legal theory whatsoever that would have enabled the disinherited spouse in question to continue residing in the trust property.”
While surviving spouses generally have a right to 50% of the community property they acquired over the course of marriage, this right can be waived through various means, including prenuptial and postnuptial agreements, or by waiving your right to property through a valid transmutation agreement, as the disinherited spouse in this case study had previously done.
The matter discussed in this case study began as an unlawful detainer action (i.e., an eviction action) brought by Keystone’s clients to force their father to move out of a property belonging to their deceased mother’s trust of which one child was the successor trustee and the other child was a primary beneficiary. They served their father with a 60-day notice to vacate the premises, but he refused to leave.
The clients’ mother had expressly disinherited her spouse from her trust, first in 2001 and again in 2017 when she restated the trust, as a result of his having engaged in extreme acts of financial waste, among other unsavory behaviors. He had agreed to his disinheritance from the trust as a condition of remaining married to the client’s mother and even voluntarily signed a deed transferring title to the property at issue into the trust’s name the same day the trust was executed.
Despite the father’s ostensible willingness in the past to be disinherited from his spouse’s trust, he told quite a different story in the lawsuit he filed against Keystone’s clients in retaliation for their unlawful detainer action. In the lawsuit, he alleged that the deed to the property that he signed should be voided because he signed it expecting to predecease his spouse, who he wanted to inherit his community property interest in the property without the property having to pass through probate. Nowhere in his complaint was it mentioned why he had been disinherited from the trust in the first place.
After filing his lawsuit, the father then filed an ex parte action to stay the eviction proceeding pending the adjudication of his civil action, relying on the principle that a court will generally not proceed with an eviction when the subject property is also named in a civil suit.
Rather than accept this purportedly procedural request as a foregone formality, Keystone’s probate attorneys saw the disinherited spouse’s desperate attempt to delay his eviction as an opportunity to make their clients’ case.
They not only informed the court of the mother’s reasons for disinheriting the father, but they also explained that under the law, even if the father were given every benefit of the doubt, he would have at most a 50% interest in the property, title to which had previously been held by the spouses as joint tenants. This 50% interest would not entitle the father to exclusively remain in the property, nor would it allow him full ownership of or title to the property. At most, it would allow him to receive a reimbursement or partial interest from the trust for the value of his interest in the property, if he were able to prove same.
This argument in itself was sufficient to convince the court that the father had no right to be living in the property, so it allowed the eviction action of Keystone’s clients to proceed.
Because of the numerous angles present in this hybrid civil/unlawful detainer case, it is necessary to understand some basic concepts before proceeding. We go over these concepts in the following subsections.
What Is a Disinherited Spouse?
A disinherited spouse is a spouse whose rights to community property either have been voluntarily waived or violated by their spouse, who is disposing of more than their 50% share of the community property through a will, trust, beneficiary designation or deed, among other things.
Unless a legally valid document exists in which the adversely affected spouse waived their community property rights, it is unlawful for spouses to dispose of anything more than their own 50% interest in the community property, regardless of whether their intentions in doing so are valid or not.
For example, a spouse may want to disinherit their gambler spouse to protect their family’s assets; however, unless the gambler spouse willingly waives their interest in the community property through a legally valid document that changes the character of the community property to separate property, any potential disinheritance would not hold up in court.
How Does a Trust Work?
Trusts are fiduciary arrangements in which one party (the trustee) holds title to assets for the benefit of another party (the beneficiaries).
For a trust to hold property, titles to property must be transferred into the trust’s name. As an example, if you want your trust to hold title to your home, you must convey your home to the trust with a deed. Without doing so, the home would remain your personal property.\
While there are many types of trusts, the most common are revocable living trusts. As their name suggests, these types of trusts can be revoked or modified by the settlor (i.e., the trust creator) during their lifetime; however, upon the settlor’s death, they typically become irrevocable.
Trusts, unlike estates, are generally not subject to probate — which is why they are such popular estate planning options.
What Is Community Property?
California is what is known as a community property state. This means that any property acquired by spouses or registered domestic partners over the course of a marriage (with limited exceptions) belongs equally to both spouses, regardless of which spouse acquired it.
Prenuptial and postnuptial agreements can affect the community property rights of spouses and registered domestic partners, as can valid transmutation agreements, which change the character of property from community property to separate property, or vice versa.
If a spouse or registered domestic partner would be adversely affected by the transmutation of community property, they would need to sign a document waiving their community property interest in the property for the transmutation to hold up in court.
What Is an Unlawful Detainer Action?
An unlawful detainer action is a type of court proceeding in which a landlord is suing one or more tenants for failing to heed an eviction notice within the timeframe listed in the notice. In such actions, the landlord is considered the plaintiff, whereas the tenants are considered the defendants.
Once an unlawful detainer action is initiated, a copy of the court papers must be delivered to the tenant(s), at which point the tenant(s) will have five days (not including weekends and holidays) to respond to the complaint. If the tenants fail to respond, the landlord can request for the court to decide the case without hearing their arguments. If the tenants do respond, either the landlord or the tenant(s) can request for the case to go to trial, where it will be decided by a jury or judge.
If the unlawful detainer case is won by the landlord, they can obtain papers from the court that notify the sheriff in the county where the property is located to evict the tenant(s).
What Is an Ex Parte Filing?
Ex parte filings are used by one party to request an order from the court without providing the other parties involved in the case the usual amount of notice to file an opposition.
Once an ex parte filing is submitted to the court, the court can decide to grant the ex parte application, or the court can decide to deny the ex parte application for a lack of urgency. In other words, if the ex parte application does not describe an emergency situation (e.g., a person or property being irreparably harmed), the court will not grant the ex parte application.
An In-Depth Look Into Keystone’s Disinherited Spouse Case
A cursory look into this case may leave you wondering whether it was lawful for the clients’ mother to essentially cut the father out of her trust, and for her sons to follow suit by trying to evict him from the home in which he had lived with their mother for almost the entirety of their 49-year marriage. However, the father’s history demonstrated that he was irresponsible with money, to the detriment of the rest of the family. By disinheriting him from her trust and leaving most of the community property to Keystone’s clients, the mother was merely trying to prevent the family’s assets from being squandered by the father.
After the clients’ mother passed away and their father exhibited other offensive behavior, the clients exercised their right to ask their father to vacate the property. Upon being asked to vacate the property, the father became intent on receiving all the trust assets that were supposed to go to Keystone’s clients.
After filing his lawsuit, the father filed an ex parte application to stay the unlawful detainer action and/or consolidate his lawsuit with the unlawful detainer action. He knew that the court typically will not proceed with an eviction if a civil complaint surrounding the same property has also been filed until the civil action is resolved.
In his lawsuit, the father made outrageous claims against Keystone’s clients. He alleged that they were trying to evict him from the property to sell the property and enrich themselves. He claimed that they had perpetrated elder financial abuse against him by retaining title to the property, even though he owned it. He claimed that as a beneficiary of the trust, he was owed fiduciary duties, which Keystone’s clients had violated. The facts of the case, however, did not support these claims.
The facts were that the decedent had agreed to being disinherited from the mother’s trust on account of the hardships he had caused the family as a consequence of his excessive financial waste. Furthermore, he had willingly signed a quitclaim deed on the same day that the mother signed the trust instrument to convey his interest in the property to the trust.
While he would state in the lawsuit that he did not understand the documents he was signing because his wife handled the majority of the family’s financial matters, and because he expected to predecease his wife, none of these claims were sufficient in proving his right to remain in the property.
If the court would have proceeded with canceling the deed to the property as the father desired, the property would have reverted to being held in joint tenancy. Property held in joint tenancy is owned in equal shares by all its owners until an owner dies, at which point the surviving co-owners assume the deceased co-owner’s interest in the property.
But because the mother had conveyed the property to her trust during her lifetime, the father would only have owned a 50% interest in the property upon her death at best, which would not have entitled him to continue residing in the property.
While the father tried everything he could to save himself from being evicted without having to prove his property interests in court, the court saw the strength of Keystone’s arguments and declined the father’s request to delay the unlawful detainer proceeding.
Keystone’s arguments surrounding the clients’ right to evict their father from the trust property in question were effective. They resulted in opposing counsel making an uncharacteristically low settlement offer just as the case was beginning, saving Keystone’s clients from months or even years of litigation.
The offer was a mere fraction of what the disinherited spouse had requested in his lawsuit. In addition, he vacated the property, dropped his lawsuit, and waived his rights to receive trust property. Needless to say, this was a resounding victory for Keystone’s clients.
The exceptional results of this case can at least partially be owed to the diligence of the clients’ mother in creating her estate plan. Not only did she expressly state her intention to disinherit the father within the trust instrument, but she had the father sign a quitclaim deed conveying his interest in the property to the trust immediately after she executed the trust. Had she not taken these steps, or if she had died without having executed an estate plan, it’s very possible that the father would have received everything.
“The takeaway is that it is important to expressly state your intentions in every estate planning document that you execute, especially if you are seeking to disinherit someone who otherwise would be entitled to inherit from your estate or trust,” says Joshua D. Taylor, a partner at Keystone. “While it will not always be possible to disinherit a spouse due to California’s community property laws, if it is something you want, making a statement to that effect in your estate planning document will not be enough. The property will also need to be transmuted through a valid community property transmutation agreement.”
Do you have a disinherited spouse issue? We can help.
Whether you are a disinherited spouse whose community property rights have been violated or you are someone who is trying to enforce a spouse’s disinheritance, Keystone’s probate attorneys are well-equipped to assist.
By having a lawyer on your team, your chances of reaching a favorable resolution significantly increase. Schedule a free consultation with one of our probate attorneys today to find out how Keystone can help.