In Haggerty v. Thornton, a September 16, 2021 opinion from the California Fourth District Court of Appeal, Division One, the court affirmed a probate order finding that a 2018, unnotarized document was a valid modification of a trust under California law.
The Facts of Haggerty v. Thornton
Jeanne Bertsch created a trust in 2015. The trust provided that Jeanne could revoke the trust “by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder.”
In 2016, Bertsch drafted a first amendment, and her signature was witnessed by a notary, although there was no notarial seal or stamp.
In 2017, Bertsch drafted a handwritten beneficiary list. This list was unsigned.
In 2018, Bertsch amended the beneficiary instructions by another handwritten, but signed, document. The 2018 document provided that the Union of Concerned Scientists (UCS) would receive “one half (Two Million Dollars)” and several individuals would receive “equal portions from the remainder half (Two Million Dollars)[.]”
Brianna Haggerty, Bertsch’s niece, argued that the 2018 amendment was invalid because it was not “acknowledged” by a notary public or other specified person under the Civil Code as described in the trust agreement. Haggerty was not a beneficiary under the 2018 or 2017 documents. The beneficiaries under the 2018 amendment responded that the amendment was “acknowledged” within the meaning of the trust agreement and, in any event, the method for amendment described in the trust agreement was not exclusive.
The California probate court denied Haggerty’s petition. In a minute order, the court made the express finding that the 2018 amendment was a valid amendment to the trust agreement. Haggerty appealed the order.
Revocation of a California Trust
The California Probate Code governs the revocation of a trust in California.
Section 15401, subdivision (a) provides that a revocable trust may be revoked either (1) “[b]y compliance with any method of revocation provided in the trust instrument” or (2) “[b]y a writing, other than a will, signed by the settlor or any other person holding the power of revocation and delivered to the trustee during the lifetime of the settlor or the person holding the power of revocation.” However, if the trust instrument “explicitly makes the method of revocation provided in the trust instrument the exclusive method of revocation,” the method in the trust instrument must be used.
Modification of a California Trust
Section 15402 of the California Probate Code governs modification of trusts. It states:
Unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation.
“This section codifies the general rule that a power of revocation implies the power of modification.” (Cal. Law Revision Com. com., West’s Ann. Prob. Code (2021 ed.) foll. § 15402.)
Revocation v. Modification: King v. Lynch
In this case, the California probate court focused heavily on King v. Lynch (2012) 204 Cal. App. 4th 1186. The appellate court summarized King and its holding regarding revocation and modification of a California trust:
In King, a married couple created a revocable trust. (Id. at p.1188.) For jointly owned property, the trust instrument described separate procedures for modification and revocation. The trust could be modified “by an instrument in writing signed by both Settlors and delivered to the Trustee[.]” (Ibid.) The trust could be revoked “by an instrument in writing signed by either Settlor and delivered to the Trustee and the other Settlor[.]” (Id. at p.1189.) After one spouse suffered a serious injury, the other spouse executed several amendments to the trust, without the first spouse’s signature. (Ibid.)
The majority opinion in King held that these amendments were invalid because they did not comply with the method of modification described in the trust instrument. (King, supra, 204Cal.App.4th at p.1194.) The majority recognized that, under section15401,a method for revocation must be explicitly exclusive to displace the statutory method. (Id. at p.1192.) But it held that, under section15402, a trust instrument need only “provideotherwise” for its method of modification to be exclusive. (Ibid.) The King majority explained, “The qualification ‘[u]nless the trust instrument provides otherwise’ indicates that if any modification method is specified in the trust, that method must be used to amend the trust.” (Id. at p.1193.) Under prior law, “courts applied the rules governing trust revocations to trust modifications. However, when the Legislature enacted sections15401 and 15402, it differentiated between trust revocations and modifications. This indicates that the Legislature no longer intended the same rules to apply to both revocation and modification.” (Ibid.) To apply the same rules, the King majority believed, would leave section15402 as mere surplusage. (Ibid.)
The King majority concluded, “The trust specified a modification method and thus, under section15402 the trust could only be amended in that manner. The settlors bound themselves to a specific method of modification. If we were to hold otherwise, especially where, as here, the amendment provision is more restrictive than the revocation provision, we would cause the amendment provision to become superfluous and would thereby thwart the settlors’ intent.” (King, supra, 204Cal.App.4th at p.1194.)
One justice in King dissented, believing that the new, higher standard for exclusivity for revocation also applied to modification under California trust law, because the purpose of the change in the existing law was to permit greater flexibility for the settlor. The King dissent concluded that the trust instrument at issue “did not explicitly exclude use of the alternative statutory method for modification or revision” so the statutory method was available.
The Method Of Modification Is the Same as Revocation Under California Law, Barring a Contrary Trust Provision
The appellate court concluded that the King dissent more accurately captures the meaning of section 15402, stating:
Section 15402 cannot be read in a vacuum. It does not establish an independent rule regarding modification. It recognizes the existing principle that “a power of revocation implies the power of modification.” (Cal. Law Revision Com. com., West’s Ann. Prob. Code, supra, foll. §15402.) The method of modification is therefore the same as the method of revocation, “[u]nless the trust instrument provides otherwise,” i.e., unless the trust instrument distinguishes between revocation and modification. (§15402.)
Section 15402 codifies the existing California rule that the power of revocation includes the power of modification, thus an available method of revocation is also an available method of modification – unless the trust instrument provides otherwise.
Here, the language of Bertsch’s trust does not distinguish between revocation and modification. It reserves the “right by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder.” Because the trust does not distinguish between revocation and modification, it does not “provide otherwise” than the general rule, and under California Probate Code section15402 the trust may be modified by any valid method of revocation. Therefore, the statutory method of revocation was available under section 15401, and Bertsch complied with the statutory method by signing the 2018 amendment and delivering it to herself as trustee.