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Standing To Challenge A Trust: The California Supreme Court Decides

The California Supreme Court, in the January 23, 2020 opinion of Barefoot v. Jennings, held that the California Probate Code grants standing in probate court to individuals who claim that trust amendments eliminating their beneficiary status arose from incompetence, undue influence, or fraud.  This decision reversed the California Court of Appeals decision that a prior beneficiary lacked standing because she was not a beneficiary or trustee under any of the trust amendments that were being challenged.

The Facts Of The California Trust Challenge

Joan Lee Maynord and her deceased husband established the Maynord Family Trust (“Trust”) in 1986.  Maynord served as sole trustee after her husband’s death in 1993.  Plaintiff Joan Barefoot is one of Maynord’s daughters.  Barefoot was a beneficiary and successor trustee under the Trust.  Two of Maynord’s other daughters Jana and Shana, the defendants, were also beneficiaries.

From 2013 through 2016, Maynord executed a series of eight amendments to and restatements of the Trust, culminating in the 24th amendment.  In the eight amendments and restatements, as set out in the 16th amendment, Barefoot’s share of the Trust was eliminated.  Barefoot was expressly disinherited and removed as a successor trustee.  Shana received a large share of the Trust and was named successor trustee.

Maynord died in August 2013.  Barefoot filed a petition in probate court alleging the eight amendments were invalid on the grounds of:

  1. Incompetence;
  2. Undue influence; and,
  3. Fraud.

As to Barefoot’s standing to challenge the amendments, Barefoot’s petition alleged standing as:

a person interested in both the devolution of [Maynord’s] estate and the proper administration of the Trust because [plaintiff] is [Maynord’s] daughter and both the trustee and a beneficiary of the Trust before the purported amendments. She will benefit by a judicial determination that the purported amendments are invalid, thereby causing the Trust property to be distributed according to the terms of the Trust that existed before the invalid purported amendments. Therefore, [plaintiff] has standing to bring this petition.

Defendants (the sisters) moved to dismiss, arguing that Barefoot lacked standing because she was neither a beneficiary nor a trustee under the Trust.  Barefoot argued she had standing because she was a beneficiary before the amendments.  The appellate court dismissed Barefoot’s challenge.

The California Supreme Court granted Barefoot’s petition for review on the narrow issue of standing.

Standing of a Prior Beneficiary to Challenge A Trust In Probate Court

The question addressed by the California Supreme Court was whether Barefoot had standing to assert the invalidity of the Trust amendments that left her without an interest in her mother’s trust estate.  The California Supreme Court looked to the probate code and its broad purpose to answer the question in the affirmative.

The appellate court relied on section 17200(a) to deny Barefoot standing.  This section provides that:

Except as provided in Section 15800, a trustee or beneficiary of a trust may petition the court under this chapter concerning the internal affairs of the trust or to determine the existence of the trust.

The appellate court used this to conclude that Barefoot did not have standing to challenge the amendments, and that the reference to “a trustee or beneficiary” only includes current trustees and beneficiaries, and means that even wrongly disinherited beneficiaries are prohibited from making the petition.

A Prior Beneficiary Has a Present or Future Interest In The Trust

The California Supreme Court focused on whether Barefoot had an interest in the Trust, stating:

The applicable Probate Code provisions support plaintiff’s standing to challenge the merits of the Trust amendments on the grounds of incompetence, undue influence, or fraud. Section 17200, subdivision (a), authorizes a beneficiary to petition the court concerning the trust’s affairs “or to determine [its] existence.” Section 17200, subdivision (b)(3) contemplates the court’s determination of “the validity of a trust provision.” Plainly, the term “trust provision” incorporates any amendments to a trust. Section 24, subdivision (c) defines a “beneficiary” for trust purposes, as “a person who has any present or future interest, vested or contingent.” Assuming plaintiff’s allegations are true, she has a present or future interest, making her a beneficiary permitted to petition the probate court under section 17200.

The broad reading of standing to challenge a trust by the California Supreme Court recognizes the probate court’s inherent power to decide all issues necessary to carry out the court’s powers to supervise trust administration.

In addition, the broad reading of standing to challenge a trust in probate court just makes sense.  A prior beneficiary can only realize their interest under a prior trust document by challenging the subsequent amendments.  The California Supreme Court therefore concluded that:

 

claims that trust provisions or amendments are the product of incompetence, undue influence, or fraud, as is alleged here, should be decided by the probate court, if the invalidity of those provisions or amendments would render the challenger a beneficiary of the trust….To hold other than we do today would be to insulate those persons who improperly manipulate a trust settlor to benefit themselves against a probate petition. Today’s narrow holding in fact provides an orderly and expeditious mechanism for limited challenges like plaintiff’s to be litigated early in the probate process, in probate court, and to ensure that the settlor’s intent is honored.

Critical to the California Supreme Court’s opinion was that the plaintiff has an interest – here, standing as a prior beneficiary.  The holding does not bestow standing to challenge a trust in California upon individuals with no interest to pursue, and should not be read to broadly permit trust challenges to anyone who feels aggrieved.

 

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Stewart J. Levin

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San Diego County

Merwyn J. Miller

Los Angeles County

Stewart J. Levin

Orange County

Priscilla Madrid

Ventura County

Naomi Stal

San Mateo County

Sally Bergman

San Bernardino County

Fred W. Edwards

Stanislaus County (Modesto)

Thomas Bonte