A Trust is the original trust document together with all amendments. Amendments, amongst other things, add and subtract beneficiaries and change inheritances to existing beneficiaries.
In California, when a revocable living trust becomes irrevocable — such as upon the death or incapacity of the settlor — the successor trustee is required to give notice to the deceased settlor’s heirs and all named beneficiaries. This includes a statutorily prescribed paragraph giving the time period the recipient has to contest the terms of the Trust.
Until a trust becomes irrevocable the named death beneficiaries have no standing to contest the trust. In Drake v. Pinkham, 217 Cal.App.4th 400 (Cal. App. 2013), California’s Supreme Court said, “[u]nder sections 17200 and 15800 a beneficiary lacks standing to challenge a trust so long as the ‘trust is revocable and the person holding the power to revoke the trust is competent’.” The California Supreme Court held that once the trust was irrevocable, the death beneficiaries then had standing to bring a petition under section 17200 of the Probate Code to contest the terms of the Trust.
On January 23, 2020, the California Supreme Court in JOAN MAURI BAREFOOT v. JANA SUSAN JENNINGS et. al. [i.e., Barefoot v. Jennings], decided whether a person who is removed as a beneficiary by a trust amendment nonetheless has standing to contest the trust amendment that removed her as beneficiary.
The decision by Court of Appeals, from which the appeal was taken, had, as the Supreme Court in Barefoot v. Jennings said, “interpreted Probate Code section 17200, subdivision (a),1 which provides that “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,” as permitting only a currently named beneficiary to make such a petition. The opinion further concluded that because the plaintiff was no longer a named beneficiary, she lacked standing to challenge the validity of the amendment that eliminated her interest under section 17200.”
In Barefoot v. Jennings, the removed beneficiary contested the later amendments that excluded her by alleging that the deceased settlor had lacked capacity and had been the subject of undue influence when the contested amendments were signed. If she were successful in litigation, the removed beneficiary would invalidate these later amendments and thus restore herself as a beneficiary.
In Barefoot v. Jennings, the California Supreme Court ruled that, “… when a plaintiff claims to be a rightful beneficiary of a trust if challenged amendments are deemed invalid, she has standing to petition the probate court under section 17200.” The Court defended its position saying, “[t]o 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.”
A logical extension of Barefoot v. Jennings is that that any beneficiary named in an earlier version of the trust who is later removed in a subsequent amendment is also entitled to receive the statutory notice once the trust become irrevocable. Otherwise, how would the removed beneficiary be put on notice regarding the administration of the trust, the beneficiary’s right to contest the trust and the time period to contest the trust?
As revocable trusts are usually administered without court supervision, there is no guarantee that the trustee will send the required statutory notice to the beneficiaries and heirs. A danger is that a bad actor will manipulate a dependent adult into signing a trust amendment expressing the wishes of the bad actor.
Thus, it is very important that the trust and all its amendments be safeguarded and not fall into the hands of self-serving individuals.
Anyone confronting the issues discussed above, be they a trustee or a beneficiary, should consult a qualified attorney and not draw any conclusions from the discussion above.