March 2018 Update
The court in Pizarro v Reynoso (2017) 10 CA5th 172 held that under a court’s equitable power, trustee’s attorney fees and costs may be charged only against the beneficiary’s share of trust. However, parties to an action for breach of trustee’s duties who are not beneficiaries cannot be held personally liable for attorney fees and costs. The court found the reasoning in Rudnick v Rudnick (2009) 179 CA4th 1328 persuasive—a court may charge reasonable and necessary attorney fees to a beneficiary’s share of a trust when that beneficiary instigates an “unfounded proceeding against the trust in bad faith”—and applied it to a situation in which the beneficiary did not bring the action but did take an unfounded position in supporting the petitioner. See §§3.31, 21.76.
When a petitioner seeks the trustee’s removal, the trustee should seek prior approval for payment of attorney fees. When the trust instrument indemnity provisions are silent on interim fees, the court, in determining whether to grant interim fees, must first assess the probability that the trustee will ultimately be entitled to reimbursement of attorney fees and then balance the relative harms to all interests involved in the litigation, including the interests of the trust beneficiaries. People v Shine (2017) 16 CA5th 524. See §§4.17J, 21.76.
A no-contest clause in an underlying document, e.g., a revocable trust, will not apply to future trust amendments unless the amendment specifically refers to the clause. Aviles v Swearingen (2017) 16 CA5th 485. See §§5.10, 5.21.
There is no privilege concerning communications relevant to an issue between parties all of whom claim through the decedent. Evid C §957. However, the §957 exception does not apply to communications when the parties to the litigation have claims against the deceased client’s estate based on inter vivos transactions. DP Pham LLC v Cheadle (2016) 246 CA4th 653. See §§5.43, 10.76.
When counsel is concerned about ERISA preemption, counsel should determine whether the account in question is actually governed by ERISA. When prior to their divorce, a decedent named his former spouse as the beneficiary of his IRA but never removed or reaffirmed the beneficiary designation after their divorce, pursuant to Arizona’s revocation-on-divorce (ROD) statute, the former spouse was not entitled to recovery. Federal IRA laws and regulations did not preempt the operation of Arizona’s ROD statute because the IRA distribution rules governed only how distributions would be treated for tax purposes. These rules did not determine who was entitled to the distributions, and the plan listed the estate as the default beneficiary in the absence of a valid beneficiary designation. Lazar v Kroncke (2017) 862 F3d 1186. See §§5.54, 6A.4.
Stats 2017, ch 56, amended Prob C §§21384 and 21386 to replace the term “gift” with “donative transfer.” The term “donative transfer” includes transfers for no consideration and transfers for unfair or inadequate consideration. The Probate Code creates a presumption of fraud or undue influence when people in a fiduciary relationship with the transferor transcribe or cause to be transcribed an instrument effecting a donative transfer to the person in the fiduciary relationship. See chap 6A.
Any person who has a fiduciary relationship with the transferor and “transcribes” the instrument or “causes it to be transcribed” is a prohibited transferee. Prob C §21380(a)(2). See §§6A.13, 14.28.
To state a claim for financial abuse, the plaintiff must allege that the wrongdoer took, or otherwise mistreated within the meaning of the statute, property of the elder or dependent adult. Welf & I C §15610.30. When the alleged harm occurs to a limited liability company owned by an elder, and not the elder him- or herself, the elder lacks standing to sue for financial abuse. Hilliard v Harbour (2017) 12 CA5th 1006. See §8.5.
A wrongdoer can commit elder financial abuse by taking property indirectly as well as directly. In a recent case, plaintiffs stated a cause of action for financial abuse by alleging that the defendant induced them to transfer money into a trust that then paid out wrongful commissions to the defendant. Moreover, if a wrongdoer deprives an elder or dependent adult of property within the meaning of Welf & I C §15610.30, that wrongdoer can be liable for financial abuse regardless of whether he or she ended up with the property in question. Mahan v Charles W. Chan Ins. Agency, Inc. (2017) 14 CA5th 841. See §8.5.
If an elder is alive but lacks capacity, then an action for elder abuse may be pursued by a representative (such as a conservator, guardian ad litem, or similar representative) on the elder’s behalf. In Tepper v Wilkins (2017) 10 CA5th 1198, the plaintiff, the elder’s adult child, sued for financial elder abuse on behalf of the elder, who was still alive, and alleged that the elder lacked capacity. The court sustained a demurrer because the plaintiff could not allege that she was the elder’s conservator, trustee, or attorney-in-fact. See §8.22.
A successor trustee is generally entitled to discover confidential communications between the predecessor trustee and the predecessor’s attorney that occurred when the predecessor, in its fiduciary capacity, sought the attorney’s advice for guidance in administering the trust. The predecessor fiduciary may be able to protect attorney-client communications by showing that actual and contemporaneous steps were taken to demonstrate that the advice was sought out of concern for personal liability, not for guidance in administering the trust. Fiduciary Trust Int’l v Klein (2017) 9 CA5th 1184. See §10.76.
Stats 2017, ch 131, amends CCP §387, effective January 1, 2018, to require a person wishing to intervene in an ongoing case to petition the court for leave to intervene by noticed motion or ex parte application setting forth grounds for intervention. The statute also specifies other procedural requirements for intervention. See §17.93.
Probate Code §850 provides express statutory authorization for the probate court to resolve disputed property claims that involve third parties who are outsiders to the estate or trust. This statute allows the filing of various petitions to recover property when the dispute involves a conservator or guardian (Prob C §850(a)(1)), the personal representative of a decedent’s estate (Prob C §850(a)(2)), or a trustee (Prob C §850(a)(3)). Under Prob C §851, as amended by Stats 2017, ch 32, a notice of hearing for a Prob C §850 petition must include a description of the disputed property, a description of the relief sought by the petitioner, and a statement that the person receiving the notice has a right to respond. See §19.10.
In Carmack v Reynolds (2017) 2 C5th 844, the California Supreme Court, on certification of a state law question to the Ninth Circuit, held that a creditor is not limited to 25 percent of mandatory trust distributions under Prob C §15306.5. A creditor may recover the entire amount to which a beneficiary is currently entitled under Prob C §15301(b) plus 25 percent of future payments to the extent not needed for education and support under Prob C §15302. See §§22.53, 22.55.
California Rules of Ct 8.104 now provides a different deadline for an appeal from an order denying or compelling arbitration of a claim involving elder abuse, assuming that one of the parties has been granted preference under CCP §36. See Cal Rules of Ct 8.712(b) (reiterating Cal Rules of Ct 8.104(a)(1)(A) and (B) but with a period of 20 days). See §§23.11, 23.12.