San Diego Estate Planning Lawyer Blog
A living trust provides a flexible estate planning tool that can shield many assets from the probate process. Most living trusts used in estate planning are revocable, meaning the person (or persons) making the trust can modify or revoke the trust at any point during his or her lifetime. The trust document itself should specify a procedure for amending or revoking the trust; in the absence of such provisions, California law may apply.
Frelo v. Opfer
It’s important to be clear in modifying or revoking a trust. A recent California appeals case provides one example of what can happen when there’s ambiguity. This case is merely an illustration of one trust and should not be construed as a general statement of California law on the subject.
Roy and Margaret Opfer, a married couple, made a joint revocable trust in 1983. They were both the settlors and co-trustees. Upon the death of one partner, the other could continue to serve as sole trustee. When both died, the successor trustees and beneficiaries would be Jeffrey Opfer, their only common child, and Linsey Frelo, Margaret Opfer’s daughter from a prior relationship.
In 2006, Roy Opfer established a second revocable trust for himself. He then transferred some real property from the 1983 trust to the 2006 trust. Unlike the 1983 trust, the 2006 trust named Jeffrey Opfer as sole successor trustee and beneficiary.
Roy Opfer died in 2008. Margaret Opfer, who had been diagnosed with Alzheimer’s in 2007, died in 2009. After her death, Linsey Frelo sued her half-brother, alleging the transfer of properties from the 1983 trust-where she was a co-beneficiary-to the 2006 trust was illegal. Frelo argued that her mother was legally incapacitated and never consented to the transfers and, in any case, her stepfather never followed the procedure for amending the 1983 trust specified in that document.
A Superior Court judge tried the case in late 2011 and partially agreed with Frelo. Since the real properties at issue were community property under California law, the 1983 trust retained the 50% interest representing Margaret Opfer’s share. Roy Opfer, however, was free to transfer his 50% to the new trust, and in doing so he did not violate the terms of the earlier trust.
The Court of Appeals, which agreed with the Superior Court’s decision, said Frelo was reading the 1983 trust too narrowly. That document said it “may be revoked…with respect to community property…by an instrument in writing” signed by one spouse and delivered to the other. Frelo said her stepfather never delivered such an instrument to her mother, making his amendment invalid. The appeals court said that while the trust language provided one method of modifying the trust, it was not the only legal method. Under California law, Roy Opfer need only sign a written instrument to himself-as he was a co-trustee-for his amendment or revocation to be effective.
A trust can specify an exclusive method of revocation, but it must do so explicitly. In the case of the 1983 trust, the qualifier “may be revoked” made it non-exclusive in the eyes of the court. Had the clause read “shall be revoked,” then Frelo’s argument might have prevailed.
As this case show, a single word can alter the meaning of a document, and in some cases prevent or initiate litigation. That’s why it’s important that you periodically review any trust or will you may have with an experienced San Diego estate planning attorney. Contact the Law Office of Scott C. Soady today if you have any questions.