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California Trust Litigation — Important 2018 Trends

On Behalf of | Oct 29, 2018 | Trust Disputes

Buffington Law Firm’s Trust Litigation team has noted some important trends concerning trust litigation during 2018.  In California trust litigation has become vastly more common in recent years because most families utilize trusts rather than wills to transfer their legacies.  In former decades the most common way for family legacies to transfer to the next generation was by will, and courts were well-adapted to handle this burden through the probate system.  However, in California wills have largely died out in favor of revocable or “living” trusts as the preferred vehicle for transferring a legacy.  The courts have struggled to keep up with this relatively new trend.  In some counties it has become notoriously difficult to move a trust dispute case to trial simply because of the backlog of cases in the probate division.  In some counties only a relatively few judges accept trust litigation cases.  This has sometimes led to delays and frustration for litigants and attornies alike.

This may be about to change for many trust litigation scenarios.

A 2018 case, Barefoot v. Jennings, has upset a longstanding practice in trust litigation.  The issue is as follows.  Sometimes an amendment to a trust will remove a certain person as a beneficiary.  This may (allegedly) be due to undue influence where one family member causes the creator of the trust to disinherit a sibling or other beneficiary.  Many trust contest deal with variations on this scenario, where a former beneficiary seeks to nullify a trust amendment that disinherited him or her on grounds that the offending trust amendment was brought about by undue influence or outright incapacity.

In the past, the disinherited (former) beneficiary would typically bring a trust petition (which is a form of lawsuit) under California Probate Code Section 17200, which allows “a trustee or beneficiary of the trust …[to] petition the court” for relief.  [Cal. Probate Code Section 17200(a)].  In the past a disinherited beneficiary would typically bring a trust petition under this section alleging undue influence or incapacity of the trustor (maker of the trust) and seeking to have the disinheriting amendment set aside.  Persons removed as trustee under such circumstance might do the same, alleging that but for the allegedly invalid amendment they would qualify as “a trustee or beneficiary of the trust” i.e. in an earlier version.  Countless such petitions have gone to trial in the past.  Probate Code Section 17200 has, in the past, provided the statutory basis for most trust contests brought in California.  The implicit argument was that if the “correct” version of the trust was recognized by the court, then the litigant certainly had standing.  And Probate Code Section 48 seemed to apply to most disinherited trust litigants, qualifying them as “interested persons” in much the same fashion as someone disinherited by a new will.

No more.  In a 2018 case, Barefoot v. Jennings, decided on September 10, 2018, a California Court of Appeal found that such a former beneficiary lacks standing to bring a trust contest petition under Probate Code Section 17200 because such disinherited person was not a “present or future” or “contingent” beneficiary.  Noting that a beneficiary’s status as such in a living trust, during the life of the trustor, was “merely potential” and could “evaporate in a moment at the whim of the settlor…” the Court found that the disinherited petitioner was not a “present or future beneficiary” as required by P.C. 17200(a) and thus lacked standing to bring a petition under that statute to contest the trust.  This obviously gives rise to a “chicken before the egg” dilemma since a disinherited beneficiary is not only deprived of his or her expected inheritance, which he or she may contend was caused by wrongful undue influence, but the alleged wrongful undue influence deprives the potential litigant of the right to bring a trust petition under the powerful Probate Code 17200 statute.  

Does this mean that disinherited (former) trust beneficiaries are barred from bringing suit if they believe they have been disinherited by wrongful means, e.g. by undue influence?  It does not.  But the Barefoot v. Jennings precedent, unless reversed by the California Supreme Court or unless the Legislature enacts new legislation, will significantly change the means by which attorneys bring such cases.  We will discuss this in our next Blog article.

If you have a trust dispute issue, Buffington Law Firm has long and broad experience in handling such matters.  We invite you to give us a call for a free legal consultation. All calls are handled by an experienced estate litigation attorney, are completely confidential, and there is no obligation.