Not infrequently, California trust litigation is caused by a poorly or carelessly drafted trust. Litigation can be costly, and trust litigation is a very good example whereby an ounce of prevention can be more valuable than the proverbial pound of cure. Our Firm does not draft trusts — we deal with litigation that arises after an estate plan is in place and becomes the subject of a dispute. Sometimes trust disputes arise due to, or are at the very least exacerbated by, a poorly-drafted trust instrument. In this brief Blog article I thought that it would be helpful if we touched on several techniques of draftsmanship and estate planning that can lead to a trust dispute — or if done correctly avoid one.
1. Is the Decedent’s Trust irrevocable and what are its terms? Some trusts are drafted in a way that makes it very difficult to determine whether the Decedent’s Trust, if there is one, is irrevocable upon the death of the first Trustor (in a two-Trustor trust.). This can be one of the most important features of a so-called “standard” estate plan, and yet it is surprising how often the drafter neglects to make this point clear. The trust provisions creating a Decedent’s Trust should clearly state that it is irrevocable upon the death of the Deceased Spouse. If it says the opposite, it should state this plainly, not in convoluted language. It should further contain terms that make it clear to a non-lawyer reader several important topics, including how is it to be funded? For example, it might clearly state that it is to be funded by the deceased spouse’s share of all community property plus that spouse’s separate property. That is simple enough (if that is the intent).
Another critical issue as regards a Decedent’s Trust is the extent to which the Surviving Spouse is allowed to take funds out of the Decedent’s Trust. There is an obvious tension between making the Decedent’s Trust irrevocable, and allowing the Surviving Spouse to take funds from it. Clear language is helpful here.
2. Trustors should initial every page. Unfortunately, Buffington Law Firm’s trust litigation attorneys have dealt with numerous cases in which someone attempted to substitute a bogus page into a trust in place of the original page. For example, the page designating who the beneficiaries are. One simple deterrent (not foolproof) to this type of misbehavior is the simple practice of having the Trustors initial each page of the Trust at the time of signing. Very seldom is this done, but this little step can deter misbehavior or at least make it harder for miscreants to get away with such.
3. Identities of minor beneficiaries. Some Trustors like to leave lots of minor gifts to a plethora of beneficiaries. This can cause lots of problems in the event that the Trust is brought within Court supervision by a trust petition for any reason, as often happens. The Probate Court will require that all of these minor beneficiaries receive notice of any hearing. When a trust features a long list of beneficiaries with names like Fred Smith or Janet Wong, and no other details, figuring out who these people are and where to mail the notice can be a near impossibility. The children of Trustors often have no idea who these people are, and Courts will delay actions for months or even years while the interested parties chase their tails trying to figure this out to satisfy the Probate Court. At the very least a trust should identify these people as best is practicable, such as, “my old platoon sergeant, last known to reside at [address]. A little thought here can save a lot of trouble later.
4. The important details should be easy to find and read. Once the Trustors have passed, the beneficiaries are going to be reading the Trust, often or usually for the first time. Frankly, although many estate planning attorneys try to outdo themselves in drafting trusts that are long and detailed, there are only a few provisions that beneficiaries care about. Specifically, they care about a) who gets what; and b) who the successor-trustee is. While the other details are important, these two provisions should be simple to find, and unambiguously written. It is astounding how many trusts make the reader weave through multiple paragraphs of convoluted legal sludge to find out these key provisions; which provisions are, after all, the main point of the trust.
5. Be thoughtful as to the successor-trustee. Too often, the identity of the successor-trustee appears not be be well thought-out. For example, Buffington Law Firm’s trust litigation attorneys have seen numerous situations in which the successor-trustee was someone known to be hostile to some or all of the beneficiaries. This is probably always a bad idea. We recommend that estate planning attorneys engage their clients in a thoughtful discussion about this (many do) because hostile or misbehaving successor-trustees are probably the single most common cause of trust litigation.
6. Be clear what comprises the trust estate. Most but not all trusts intend to dispose of all of the Trustors’ assets. Nonetheless, this is not often clear. Yes, most trust estate plans contain a pour-over will, which is a will that simply bequeaths all assets not titled to trust to go (be “poured over”) into the trust. Nonetheless, if a Trustor intends for all of his or her assets to be contained in the Trust, it is good practice to simply say so.
If you are involved in a trust dispute, Buffington Law Firm’s trust litigation attorneys invite you to contact us for a Free Legal Consultation. All consultations are with an experienced trust and inheritance litigation attorney and are fully protected by the attorney-client privilege.