New California case expands shifting trust/trustee attorneys’ fees and costs to a beneficiary’s share of the trust

New California trust dispute decision expands shifting trust/trustee attorneys’ fees and costs to a beneficiary’s share of the trust – Pizarro v. Reynoso, California Court of Appeal, Third Appellate District, Case No. C077594, (March 28, 2017)

Summary. The decision in Pizarro v. Reynoso expands the shifting of trust/trustee attorneys’ fees and costs to a beneficiary’s trust share, and in relevant part reminds us that all trust and estate litigation cases vary and are determined in significant part by the facts and circumstances of that case, the relevant case law, and the discretion of the trial court judge. In Pizarro v. Reynoso, on appeal the Court of Appeal held as follows:

  1. The terms and intent of the trustor prevail in substance – refusing to elevate form over substance the court upheld a sale of the trust real property to a specific beneficiary which the trust authorized in the trustee’s discretion if the beneficiary could afford to purchase the house. The trustee in fact in part assisted the beneficiary in that purchase so that the beneficiary could purchase the property – never the less the court upheld the sale based on substance over form and the intent and terms of the trust.
  2. Under the court’s equitable powers, the attorneys’ fees and costs incurred by the trust/trustee are chargeable against the trust share of a beneficiary who brings an unfounded proceeding against the trust, but those attorneys’ fees and costs cannot be awarded against the beneficiaries other personal non-trust assets, citing Rudnick v. Rudnick (2009) 179 Cal. App. 4th 1328, 1332-1333, 1335, and Estate of Ivey (1994) 22 Cal. App. 4th 873, 877-878, 882-886.
  3. Important – in an expansion of #2 above and charging fees and costs to a beneficiary’s trust share, under those same equitable powers, the court also can award the trust/trustee attorneys’ fees and costs against the trust share of a beneficiary who has not filed or brought a proceed, but who takes an unfounded position and litigates in bad faith causing the trust to incur fees and costs (the beneficiary changed her position to being against the trustee, and in the trial court’s opinion then offered false testimony by declaration, deposition and at trial – offering false evidence in litigation is a bad faith litigation tactic).
  4. The court’s decision also cites or makes reference to California Probate Code §17211(a) and §15642(d), which state as follows (and I have also provided below §17211(b):

17211(a)

(a) If a beneficiary contests the trustee’s account and the court determines that the contest was without reasonable cause and in bad faith, the court may award against the contestant the compensation and costs of the trustee and other expenses and costs of litigation, including attorney’s fees, incurred to defend the account. The amount awarded shall be a charge against any interest of the beneficiary in the trust. The contestant shall be personally liable for any amount that remains unsatisfied.

(b) If a beneficiary contests the trustee’s account and the court determines that the trustee’s opposition to the contest was without reasonable cause and in bad faith, the court may award the contestant the costs of the contestant and other expenses and costs of litigation, including attorney’s fees, incurred to contest the account. The amount awarded shall be a charge against the compensation or other interest of the trustee in the trust. The trustee shall be personally liable and on the bond, if any, for any amount that remains unsatisfied.

15642(d)

(d) If the court finds that the petition for removal of the trustee was filed in bad faith and that removal would be contrary to the settlor’s intent, the court may order that the person or persons seeking the removal of the trustee bear all or any part of the costs of the proceeding, including reasonable attorney’s fees.

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Can You Stop An Aging Parent From Self-Neglect At Home – by Carolyn Rosenblatt

The following is a good discussion by Carolyn Rosenblatt, on a topic that is ongoing for many, many families – can you stop an aging parent from self-neglect at home? The link to Carolyn’s article is provided below.

When is it self-neglect or self-abuse, and what can or do you do about it?

Unless you have the cooperation of the parent (and other family members), and the needed financial, insurance coverage, and time resources, and know who to contact, the issues are even more difficult to resolve. I see many family members who are dealing with these issues in trust, power of attorney, and conservatorship situations. What are the responsibilities/duties and rights, and what options are available and can be achieved? I am also aware of one California case involving a finding of elder abuse in a situation where family members did not take action to try to remedy the situation.

These issues are or can be difficult even with cooperation and resources. To see Carolyn’s article, CLICK HERE.

Dave Tate, Esq. San Francisco and California

I’m Getting Back To Using Video – A Video About My Practice Areas

Greetings all. I am getting back to using video more often, and another new initiative which I will be telling you about shortly. Moving forward I am trying to do one video a week, and then the other posts will be in writing.  I have done a quick video about my practice areas. Enjoy and tell others. Thanks. Dave Tate, Esq., San Francisco / California, (415) 917-4030.

New Case – How Far Can A Court Go To Interpret A Trust – Ammerman v. Callender

In Ammerman v. Callender (March 24, 2016, Case No. G049880) the California Court of Appeal for the Fourth Appellate District was called upon to determine the extent to which the lower trial court could interpret the intent of the trustor and to change the terms of the trust to be in accord with the intent that the trial court determined. Below I have pasted relevant wording from the Appellate Court discussing the principles of the court’s ability to interpret the trust.

You should note that this is an appellate level court decision, other California appellate courts have issued decisions that are not necessarily entirely in accord, California Supreme Court decisions may differ and overrule this decision, and in significant regard, even when reading the below posted language, how far to interpret the trustor’s intent and the extent to which the introduction of extrinsic evidence will be allowed to express the trustor’s intent remain at the discretion of the trial judge.

Two principles do appear certain, (1) it is the intent of the trustor that should prevail, and (2) the court cannot rewrite the terms of the trust unless there is sufficient evidence, based on the wording of the trust or based on extrinsic evidence, or based on both, that the wording of the language in the trust is in conflict, or is ambiguous, or fails to address the present situation, or in some manner fails to express the trustor’s intent, and even in those circumstances the court cannot simply go ahead and rewrite the terms unless the evidence taken as a whole indicates that the trustor so intended the new terms.

It would logically also seem that the more radical the new or different terms are from the current terms of the trust, the greater the evidence would need to be that the trustor really, truly did intend the application of the new or different terms. Further, I continue to disagree with these being judge-determined cases – a jury trial should be available for the interpretation of intent and extrinsic evidence.

Below, at the bottom of this blog post, I have pasted relevant wording from the decision discussing principles of trust interpretation.

Dave Tate, Esq., San Francisco and California, tel.: (415) 917-4030, http://tateattorney.com, http://californiaestatetrust.com, http://auditcommitteeupdate.com, trust, estate, probate, real estate, conservatorship, power of attorney, elder and dependent adult, and business litigation; administrations guiding fiduciaries and beneficiaries; audit committees and D&O.

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The following is relevant wording from the decision in Ammerman v. Callender.

Ammerman v. Callender Principles of Trust Interpretation

New Case – Hospital That Was Systematically Understaffed Supported Cause Of Action For Elder Abuse – Fenimore V. Regents Of The University Of California

This is an important new case, but you do need to read the facts and opinion carefully to determine whether your situation fits. Here is a pdf of the opinion Fenimore v. The Regents of the University of California.

It is arguable that this opinion expands the situations where an elder abuse claim can be stated.

For more than 20 years there has been a tug-of-war between ordinary negligence including medical or care malpractice on the one hand and elder abuse on the other hand. And that tension will continue; however, very slowly the courts are more often holding that elder abuse can be alleged in a medical or care situation where there are systemic deficiencies such as, for example, lack of staffing and inadequate training, particularly where those deficiencies violate a statutory duty, requirement or standard of care.

As the underlying opinion in Fenimore applies in the circumstance of systemic violation of a statutory duty, arguably this case, as it applies to elder abuse, could be cited in a whole host of care and other situations including but not limited to nursing homes, RCFE/assisted living, fiduciary care duties, fiduciary financial duties, and more.

Dave Tate, Esq. San Francisco and California – civil real property and business, trust, estate, conservatorship, power of attorney and elder abuse litigation, and helping fiduciaries and beneficiaries in administrations. http://californiaestatetrust.com, and audit committees and D&O http://auditcommitteeupdate.com.

Broad Process Conservatee and Fiduciary/Conservator Decision Making

The California Fiduciaries Code of Ethics and the National Guardianship Association Standards of Practice provide requirements for professional fiduciaries, which are also helpful to guide non-professional fiduciaries. The following is a summary of the broad process for conservatee and fiduciary/conservator decision making in the Code of Ethics and the Standards of Practice – of course the Code of Ethics and the Standards of Practice contain much greater coverage of these topics and each situation much stand and be evaluated separately and by itself – the below discussion about informed consent, substituted judgment and best interest covers the broad process approach. I also find it interesting that I have never heard a discussion by a Court about this or a different process for conservatee and fiduciary or conservator decision making. Comparing this to board of director deliberations, perhaps this might, at least in small part, be analogized to the business judgment rule?

1. Informed Consent – The decision should first be made by informed consent if possible.

A person’s (the conservatee’s) agreement or decision to allow or to have something happen that is based on a full disclosure of facts needed to make the decision intelligently, i.e., knowledge of the risks involved, alternatives, etc.

In other words, the individual choice or decision by the conservatee, that the conservatee is capable of making, unless doing or allowing so would violate the fiduciary’s duties to the conservatee or impose unreasonable expense to the estate.

2. Substituted Judgment – Second, if informed consent cannot be obtained, the decision is made by substituted judgment if possible.

The principle of decision making that requires implementation of the course of action that comports with the individual person’s (the conservatee’s) known wishes expressed before incapacity, provided the conservatee was once capable of developing views relevant to the matter at issue and reliable evidence of those views remains.

In other words, the decision is made or action taken or not taken, by the fiduciary, based on the ascertained desires and wishes, if any, of the conservatee, as expressed or demonstrated by the conservatee while the conservatee had capacity to so express or demonstrate, relevant to the current subject matter at issue, unless doing or allowing so would violate the fiduciary’s duties to the conservatee or impose unreasonable expense to the estate.

3. Best Interest – If informed consent, first, and substituted judgment, second, are not available or possible, the decision is made based on best interest.

The course of action that maximizes what is best for a person (the conservatee) and that includes consideration of the least intrusive, most normalizing, and least restrictive course of action possible given the needs of the conservatee.

New Story – Charity requests an accounting after all assets are distributed – nothing left to pay for it

Here’s a new story that I heard about recently – it’s not one of my cases.

The decedent died and the successor trustee began administering the trust. The trustee then made prior partial distributions to all of the beneficiaries including the charity, none of whom objected or requested additional information or an accounting. Over time the trustee finished the administration of the trust and then distributed the remaining assets to the same beneficiaries. No assets remain in trust.

The charity beneficiary has now requested an accounting – not that they believe anything is wrong – they just want an accounting to be sure.

The trustee had a couple of options for how to make the final distribution: (1) do it as the trustee did; (2) get a waiver of accounting and information (and consent) from each beneficiary (see Cal. Probate Code sections 16060 through 16069), (3) prepare and provide an accounting to each beneficiary and obtain a waiver and consent; or (4) prepare an accounting and submit a petition to the court for an order approving the accounting.

Unless in some situations the trust provides otherwise, the statute of limitations on an action against a fiduciary trustee for breach of duty is three years, but also could be longer in cases where wrongful actions were hidden and it could not be expected that the beneficiary knew or should have known about the wrongful actions.

Each case is different, there isn’t one correct or absolutely wrong way to handle the above situation, but only (4) will (in most cases) clear the trustee from future actions and liability.

In the above situation the trustee now has to provide the requested accounting and information, but without the funds being available in the trust to pay for it. There might also be a possible need or requirement for beneficiary return of assets that have already been distributed – but that possibility also raises the issue whether return of assets can be compelled.

These situations require risk management, due diligence and evaluation of the various options available.