Trusts
If you are creating a will or trust with multiple beneficiaries in California, you may have learned about California’s no-contest clause, which prohibits a beneficiary of your will from receiving a gift if they challenge the will in court. Many people believe adding a no-contest clause to their will or trust will prevent disputes between their named beneficiaries. However, before making the decision to add a no-contest clause to your will or trust it is important to understand the nuances and ramifications of California’s no-contest clause.
What Does a No-Contest Clause Do?
According to California Probate Code section 21310(c), a no-contest clause is “a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary for filing a pleading in any court.” Including this provision in your will or trust penalizes a beneficiary if they contest or challenge the terms of said will or trust in court. The penalty typically revokes the gift the beneficiary would have otherwise received from the trustor.
For example, if a beneficiary stands to receive a quarter of the assets left in a will or trust upon the death of their family member a no-contest clause seems to be a strong deterrent against suing to gain a larger share of the assets in the will or trust. However, it is important to remember that simply including a no-contest clause in your will or trust does not prevent a beneficiary from suing.
How is a No-Contest Clause Enforced?
No-contest clauses are enforced by revoking or minimizing the gift a beneficiary would have received from a will or trust had they not challenged it in court. However, as noted above, this does not mean that they cannot sue. In California, a beneficiary who believes they have probable cause to contest a will or trust may not be penalized for taking such an action, and in fact, may be rewarded with a larger share of the will or trust’s assets.
According to California Probate Code, “probable cause exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery.”
No-contest clauses are only enforced after the contestant loses at trial. If the contestant wins, the trust or will, along with the no-contest clause, may be deemed invalid, and as such will not be enforced.
Consult an Estate Planning Attorney
Whether you are considering adding a no-contest clause to your will or trust or would like to contest a will that contains a no-contest clause, The Law Offices of Daniel Leahy is prepared to advocate for you. Mr. Leahy is an experienced Northern California attorney who handles matters of trusts and estate law. Serving Alameda County and the surrounding area, the Law Offices of Daniel Leahy in Oakland are prepared to handle your legal questions after a loved one has passed. Call (510) 985-4151 or contact us online to set up a free consultation.
Trusts
One of the most important decisions made during creation of a trust is the selection of a sole trustee or co-trustees. A trustee is a person who manages and distributes trust assets, and co-trustees must perform these duties together. Although there are certainly cases where co-trustees work well together, in California disputes between co-trustees often arise when they cannot reach a unanimous decision regarding the trust they are administering. In these cases, it is important that each co-trustee knows their rights, so the conflict may be resolved without harming the beneficiaries of the trust.
Co-Trustee Disputes in California
Unlike most states, in California co-trustees may only make administration decisions through unanimous consent. According to California Probate Code, unanimity applies to co-trustees “unless otherwise provided in the trust instrument.” Although an estate planning attorney may discuss such language with a trustor to allow action by a majority of trustees, if that wording is not included, actions cannot be taken without consent of all trustees.
In these situations, conflict is likely to arise when the co-trustees are unable to agree on the actions to take on behalf of the trust. Decisions including hiring an attorney to review the trust, hiring a real estate agent to sell trust property, or hiring an accountant to prepare tax returns must be consented to by all trustees named by the trustor.
Co-Trustee Resolutions in California
If you find yourself embroiled in a dispute with your co-trustee(s) there are legal steps you can take to resolve the conflict. Co-trustees who are subject to the default rule in California may file a petition for instructions, which asks a judge of the Superior Court to provide direction to the co-trustees. The purpose of requesting a hearing is to ask a judge to determine whether a trustee’s actions are right, and in the best interest of the trust.
A trustee may also petition the court to remove their co-trustee. Removing a trustee is a complex process that involves holding a hearing to examine the evidence supporting the petition’s request. It also gives the co-trustee an opportunity to respond to the issues raised in the petition. Removal of a co-trustee may be granted if the court finds evidence of wrong-doing or mismanagement of the trust by a co-trustee.
It is important to remember that each trust dispute brings its own complexities that should be examined by an experienced estate planning attorney before action is taken.
Consulting a California Estate Planning Attorney
If you believe your co-trustee is no longer acting in the best interest of the trust you are administering together, Daniel Leahy can help make things right. Mr. Leahy is an experienced Northern California estate planning attorney. Serving Alameda County and the surrounding area, the Law Offices of Daniel Leahy in Oakland is prepared to handle your estate planning issues. Contact us or call (510) 985-4151 to set up a free consultation.
Trusts
If you recently discovered that you are the beneficiary of a trust in California, you may have a number of questions about your newfound status. For example, you may wonder, “What rights do I have as a beneficiary of a trust?” Understanding your rights as a beneficiary is essential because you are entitled to the cash or other assets held in that account.
Understanding Trusts
Trusts can replace or supplement a will, as well as manage one’s property during life. As an estate-planning tool, a trust manages the distribution of a person’s property and assets by transferring its benefits to different people named in the trust. These people are called “beneficiaries.”
When creating a trust, a property owner transfers legal ownership of their property to a person or institution, called a trustee. The trustee manages the property in the trust for the benefit of the beneficiaries named in the trust. A trust creates a fiduciary relationship between you as the beneficiary and the trustee.
What are Your Rights in California?
A trustee must act solely in the best interests of the beneficiary when handling trust property. As a beneficiary, you should be aware of your rights, so a trustee does not take advantage of their position. Trustees who do not live up to their fiduciary duty may be legally accountable to the beneficiary of a trust for any damage to his or her interests.
In California, the trustee is required to provide an annual accounting to “each beneficiary to whom income or principal is required or authorized in the trustee’s discretion to be currently distributed,” according to state probate code.Additionally, beneficiaries are entitled to an accounting of the trust in the event the trust is terminated or the trustee changes.
An accounting of a trust must satisfy the legal requirements set by the state of California. Trustees must inform beneficiaries of any expenses incurred by the trust as well as any property that has been distributed by the trustee. Beneficiaries must also be informed of the extent of property still held in trust, in addition to any obligations the trustee is required to pay.
What Should You Do if You Feel Your Beneficiary Rights Have Been Violated?
If you are the beneficiary of a trust and feel your rights were violated, talk to Daniel Leahy. Serving Alameda County and the surrounding area, the Law Offices of Daniel Leahy in Oakland can protect your rights. Call (510) 985-4151 or contact us online to set up a free consultation.
Trusts
When a loved one passes, it is important to adhere to their wishes with regard to their money and property. If they placed their assets in a trust, there may be an administrator of the trust who will handle the dissemination of those assets. The designated administrator of a trust has an obligation to act in the best interest of the beneficiaries of that trust; if they fail to do so, there are several legal courses of action that beneficiaries can pursue.
The administrator’s obligation is referred to as fiduciary duty, which is the obligation to act in someone else’s best interest. A fiduciary duty arises when someone places their trust and confidence in another person, with the knowledge of that person.
Remedies for misuse of assets
When a trust administrator or “trustee” steals or misuses funds from a trust in California, they open the door to a lawsuit. If you can trace stolen funds to the administrator in question, enjoining the funds – which means urgently preventing further interference with the assets – is a dependable option to prevent any further wrongdoing with regard to the trust. One method of enjoining is to request that the court grant a preliminary injunction, which is a court order issued at the beginning of a legal action that forbids the recipient from performing an act – in this case, using the trust funds – in order to maintain the current status until the court reaches a decision.
California Civil Procedure Code permits the court to issue an injunction before the final judgment. The court is also permitted to formally instruct the trustee on the terms of the trust, overriding the trustee’s decisions to date, removing the trustee, or appointing a temporary fiduciary in place of the fiduciary who acted in bad faith. In addition to an injunction, the bank holding the trust can restrict access and activity in the account, preventing the institution from releasing funds without authorization from a judge. The court will have to provide explicit direction to the bank in order for this to work.
Knowledgeable guidance from a California estate planning attorney
Whether you are a trustee, beneficiary, executor, or administrator, Daniel Leahy is prepared to treat your unique situation with sensitivity and attention to detail. At the Law Offices of Daniel Leahy in Oakland, we have the knowledge and experience to handle your trusts and estate issues. Call (510) 985-4151 or contact us online to schedule a free consultation.
Trusts
Fiduciary duty is the obligation to act in someone else’s best interest. A fiduciary duty arises when someone places their trust and confidence in another person, with the knowledge of that person. Common relationships that beget fiduciary duty include many business and business-adjacent contexts, including corporations, partnerships, real estate, clergy, and trusts and estates. When you are named a trustee, you have a fiduciary duty to the trust’s beneficiaries that you must fulfill.
Duties of a fiduciary
In California, a trustee is given distinct duties under Division 9, Part 4 of the state’s Probate Code. The fiduciary duty arises when you agree to be designated as a trustee. The major responsibilities of a trustee include:
- Administering the trust in accordance with the trust instrument (i.e., the written document creating the trust)
- Following written instructions given to the trustee in the case of a revocable trust created by the initiator of the trust
- Administering the trust solely in the interest of the beneficiaries
- Handling multiple beneficiaries with impartiality, even when the beneficiaries have different interests
- Not using the trust’s property for the trustee’s own profit or benefit
- Not requiring beneficiaries to waive the trustee’s liability
- Not knowingly becoming a trustee to any additional trusts that may be counter to the first trust’s beneficiaries’ interests
- Taking reasonable steps to maintain control of and preserve the trust’s property
Breach of fiduciary duties
If someone else has placed their trust and confidence in you, you are legally forbidden from acting in any way that is detrimental to the beneficiary’s best interest. In such a situation, you must exercise honesty and integrity rather than acting in your own best interest at the expense of the other party. If you fail to act in the other party’s best interest, you may have committed a breach of fiduciary duty, which opens the door to legal action against you.
The best way to avoid this is to maintain open and honest communication with the other party, thus avoiding a breach. However, if you have been accused of a breach, it is in your best interest to contact an experienced trusts and estates attorney to evaluate the situation.
Consult an experienced California trusts and estates attorney
Whether you are a trustee, beneficiary, executor, or administrator, The Law Offices of Daniel Leahy in Oakland is prepared to handle your trust and estate legal issues. Call (510) 985-4151 or contact us online to schedule a free consultation.
