Probate Appeals

Keystone’s client was the godson of the decedent, and he, along with the decedent’s property manager, were named as 50/50 beneficiaries and co-trustees of the decedent’s trust. The decedent, however, subsequently executed a trust amendment that reduced his godson’s share to $200,000 and increased the property manager’s share to 100% of his multimillion-dollar estate. Keystone and its co-counsel challenged the amendment by alleging that the property manager had not only unduly influenced the decedent, but also had committed financial elder abuse against him. We additionally asserted that the property manager was a prohibited transferee who transcribed the amendment. After a multi-day trial, the court invalidated the amendment and disinherited the property manager, who, as a result, was disqualified from receiving his 50% share under the terms of the original trust. The court also awarded Keystone’s client his attorney’s fees and costs in the amount of $324,719.96. The property manager appealed the probate court’s decision; however, the appellate court affirmed the ruling.

In the published decision Blech vs. Blech, a decedent had created a trust that named his four children as the primary beneficiaries. The trust contained a spendthrift clause, which meant that beneficiaries would not be permitted to sell, assign, transfer or give away their interests in the trust to third parties, nor would third parties be permitted to take or buy any of the beneficiaries’ interests.

The terms of the trust called for the trustee to pay a percentage of the principal to beneficiaries annually on the anniversary of the decedent’s death. However, almost immediately following the decedent’s death, litigation ensued between the beneficiaries that resulted in a settlement agreement, which, among other things, called for one of the beneficiaries to pay Keystone’s client, another beneficiary, a settlement amount. The beneficiary failed to fulfill this obligation, so Keystone’s client secured a judgment against him and later filed a petition with the probate court seeking to apply the debtor-beneficiary’s annual distribution to the satisfaction of the judgment. Due to the existence of a spendthrift clause, the probate court limited the amount Keystone’s client could secure to 25% of each annual distribution received by the debtor-beneficiary. Around this same time, the California Supreme Court in Carmack vs. Reynolds expanded the reach of creditors to access trust distributions, even if the trust in question has a spendthrift clause. Because of this ruling, Keystone’s client was able to secure a judgment to secure the remaining 75% of the debtor-beneficiary’s trust distributions. The debtor-beneficiary appealed the decision; however, the appellate court sided with Keystone’s client and upheld the probate court’s ruling. With this case, Keystone set the standard for how to secure the entirety of a debtor-beneficiary’s distribution from a spendthrift trust to satisfy a judgment.

In the published decision Sefton vs. Sefton, a Keystone attorney represented a plaintiff who was appealing a prior probate court decision that resulted in him in not receiving a substantial share of his grandfather’s trust. When the grandfather created his trust in 1955, he gave his son, the client’s father, a lifetime estate, with the remainder going to “his living issue,” which, at the time the trust was executed, automatically gave the father non-exclusive power of appointment. In other words, every one of the father’s living issue would be entitled to receive a substantial share of the trust estate. The father’s living issue included the client (the only child from his first marriage), the son from his second marriage, the daughter from his second marriage, and the father’s grandchildren from his second marriage. However, in 1970, the California legislature enacted Probate Code Section 652, which modified the presumption of power of appointment to be exclusive. This meant that the father could exclude any one of his living issue, so long as the grandfather’s trust did not designate to them a minimum or maximum distribution. When the father died, he left portions of his life estate to his children from the second marriage, but completely excluded the client. The client, in turn, filed a petition with the probate court claiming that not only did his father’s use of the power of appointment go beyond the scope of the authority provided to him by the grandfather, but also that he was entitled to a portion of the trust estate. An objection was filed by the client’s half-brother stating that the new laws regarding power of appointment, not the laws in effect at the time of the grandfather’s execution of his trust, controlled; therefore, the father did have the right to exclude the client. The court sided with the respondent, causing the client to file an appeal. On appeal, the court reversed the lower court’s decision, finding that the father’s power of appointment was non-exclusive. This meant that the client was, in fact, entitled to a substantial inheritance in the amount of $565,350 plus interest.

The client of Keystone’s attorney had been named as a beneficiary of his mother’s trust, along with his sister, his sister’s son and an educational institution. However, his sister, in her capacity as successor trustee, filed a petition to reform the trust on the grounds that its terms had been misrepresented by the drafter, leading to the settlor mistakenly signing the trust believing that it reflected her intent. Additionally, the trust did not contain the distribution plan the settlor had outlined to her attorney. The sister proposed to amend the trust to contain the decedent’s true intent, which, according to her, required that the principal that remained to be equally distributed to her and her son after 10 years of the assets remaining in trust. The trust at issue had a no-contest clause, which the client of Keystone’s attorney believed had been violated by his sister’s reformation petition because it was seeking to invalidate the provisions of the trust on the basis of undue influence, fraud and duress. He filed a Petition for Instructions with the court to determine whether the reformation petition violated the no-contest clause and whether his sister had probable cause to file it. In response, his sister filed an Anti-SLAAP motion, which is a motion to dismiss a case prior to the discovery phase of litigation, that the court granted. The client then proceeded to take the case to an appellate court, where he argued that the probate court’s decision should be reversed since he likely would have prevailed in court had his petition been granted. The appellate court agreed that the client’s case had sufficient merit to potentially succeed during probate proceedings, so it reversed the decision, giving the client a chance at inheriting from his mother’s trust.