San Diego Estate Planning Lawyer Blog
When you create a revocable living trust, your trustee has a legal duty to ensure your wishes, as expressed in the language of the trust document, are carried out. There may be pressure from family members or other interested parties to alter the trust’s meaning for their benefit, but at the end of the day, a California court will always look at the intentions of the person making the trust. Since most trust disputes occur after the settlor’s death, it is therefore important to seek the assistance of a qualified California estate planning attorney in drafting any trust instrument.
San Diego Court Rejects Unusual Trust Calculation Method
Recently the California Fourth District Court of Appeal, which has jurisdiction over San Diego and surrounding counties, decided a major case involving trust interpretation. The settlor was the late Donald Callender, the son of Marie Callender, the famous California restauranteur. Although the family’s namesake restaurant chain was sold in the 1990s, Donald Callender retained an interest in the licensing of the Marie Callender’s name, which combined with his other assets left a trust worth over $143 million at the time of his death in 2009.
Callender’s trust specified that upon his death, the principal and income of the trust should be divided in equal one-third shares among his wife, son, and daughter. (The daughter was from a prior marriage.) However, the trust also said any estate taxes owed would be paid out of the shares of the daughter and son. This was not an insignificant matter. The Callender estate owed nearly $39 million in federal estate taxes, which was charged equally against the children’s shares.
The wife subsequently argued the children’s percentage shares of the trust assets—which includes the royalties from licensing the Marie Callender’s name—should be reduced to account for the tax bill, meaning she would get nearly half of the residue as opposed to one-third. The daughter challenged this claim, which led to a trial before a California probate court. That court accepted the wife’s argument that a “changing fraction method” should apply to the distribution of the trust residue, notwithstanding the trust language’s statement that the assets should be divided equally among the three family members.
The Fourth District reversed this decision. Neither the trust language nor California law supported the so-called changing fraction method (which has only been recognized in a few other states). The estate planning attorney who drafted and administered the Callender trust said he never even heard of the method prior to this litigation. As drafted, the trust explicitly required an equal distribution of assets. The deduction of estate taxes from the children’s shares did not alter this reality.
Get Help from a California Trust Attorney
The Fourth District credited the testimony of Callender’s estate planning attorney as a key factor in its decision. A trust is a complex legal undertaking regardless of the size of the trustor’s assets. That is why if you are considering a trust as part of your own estate plan, you should seek competent legal advice. If you need to speak with an experienced San Diego estate planning attorney right away, contact the Law Office of Scott C. Soady.