Updating one’s estate planning documents involves changes to one’s trust, will and/or designation of death beneficiaries, as relevant. To be effective such updates must be done correctly. Otherwise, if done ineffectively, the result can be disappointment and lawsuits for those concerned.
Under California law, a trust can be amended either using the method stated in the trust, or, alternatively using a document, other than a will, that is both signed by the settlor (or other person holding the power to revoke the trust) and delivered to the trustee. The alternative (statutory) method, just mentioned, cannot be used if it is disallowed by the trust. Usually the trust uses the statutory approach anyway.
In the recent case of MARGARET PENA v. GREY DEY, decided by the Third District California Court of Appeals, the deceased settlor Robert Anderson had made handwritten interlineations – i.e., he had crossed out existing trust language and handwritten in his revisions – to his most recently executed amendment of his trust. Mr. Anderson then mailed the interlineated trust amendment, with a signed “post it” note on top, to his attorney to draft an amendment.
Unfortunately, Mr. Anderson died unexpectedly before he could sign a trust amendment. The intended beneficiary, his close friend Grey Dey, argued that Mr. Anderson’s interlineations effectively amended the trust and that, if necessary, the signed post note satisfied the signature requirement.
The Appellate Court did not agree. Unlike with holographic (handwritten) wills a trust document cannot be changed simply by crossing out the existing language and inserting replacement language without any signature. Nor did the separate signed post it note satisfy the signature requirement.
Had Mr. Anderson signed and dated an attachment affirming each of his specific handwritten changes (interlineations) he made to his trust then he would have amended his trust.
Next, the will. Changing one’s Will is done either by means of executing a Codicil or executing a new Will that revokes the old Will. A Codicil is executed the same as a Will: it is signed by (or acknowledged by) the Testator with at least two witnesses. Current California law no longer requires that the Testator and the witnesses all be present together at the same time when they each sign the will or codicil.
Holographic (handwritten) wills unlike typed wills, however, do not require any witnesses. Also, handwritten changes to the holographic will can be made by the testator directly onto the original will — without requiring any further date or signature to be added. Such handwritten changes are automatically incorporated and integrated into the original will.
Death beneficiary designation forms — used to name primary and alternative death beneficiaries to life insurance policies and retirement plans — involve preprinted forms which must be completed following instructions. In California, a Community Property state, a surviving spouse is limited in changing who inherits from their retirement plan, if it is a Community Property asset. That is, the signed, written consent of the non participant spouse while alive is required on the designation of death beneficiary form also signed by the participant spouse.
Unless the deceased spouse, while alive, signs a document revoking such lifetime consents to existing designation of death beneficiaries, any change of death beneficiary form signed by the surviving spouse alone is only effective with respect to the surviving spouse’s own one-half community property interest, and any separate property interest, in the surviving spouse’s retirement account.
If the deceased spouse’s will revokes the deceased spouse’s lifetime consents to designation of death beneficiaries and permits the surviving spouse to say who inherits the surviving spouse’s own retirement account then the surviving spouse may control who inherits the entire account.
Changing one’s estate planning documents deserves the same level of careful consideration and counsel that was involved with preparing the original documents. While it may be tempting to proceed with less caution or to delay updating one’s estate planning, both are unwise actions. The result may mean that someone whom you care very much about will not get what you intended for them to receive.