In Siegel v Fife (Feb. 26, 2015, B253746) 2015 Cal App Lexis 180, Settlor created a revocable trust in 2005. The trust included a specific gift of a residence to a neighbor and $50,000 in trust to care for Settlor’s cats after her death.
In 2011, Settlor amended the trust to make it irrevocable because she felt she would be unable to resist pressure by her cousin to change her estate plan to benefit him. Sure enough, she then executed a new trust that purported to revoke the 2005 trust and left everything to her cousin.
In 2012, the probate court appointed a conservator of her estate and person. The court declared the 2011 trust void and the 2005 trust to be the operative trust. The conservator moved Settlor to an assisted living apartment. The trustee filed a petition to sell the residence to pay her assisted living costs and other expenses. The neighbor objected, arguing that the trustee must sell other property. The probate court confirmed the sale, and the court of appeal affirmed.
The trust gave the trustee broad authority to sell trust property to pay for Settlor’s care. The abatement statute provides that beneficiaries’ shares are reduced as necessary to effectuate the trust’s plan or purpose. Specific gifts have priority over general gifts.
But the issue is whether the trustee may sell the house. Nothing in the abatement statute prevents such a sale. The court added: “We express no opinion as to priorities for payment in the event that [Settlor] passes away and funds remain under the control of the trustee.” The cats will have to wait.
As amended, the 2005 trust resembles a “permanent trust” as described in CEB’s Drafting California Irrevocable Trusts, chap 5. On revocation and amendment, check out CEB’s Drafting California Revocable Trusts, chap 20.
For a detailed discussion of abatement and the related problem of ademption, see CEB’s California Will Drafting §§12.3-12.15 and Drafting California Revocable Trusts §§8.5-8.9. A brief overview of these problems is in CEB’s California Estate Planning §§5.32-5.33.
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Other CEBblog™ posts you may find interesting:
- Should You Go with a Living Trust?
- No Means No for Successor Trustee of Special Needs Trust With No-Compensation Clause
- With Great Power Comes Great Responsibility: Do You Need A Trust Protector?
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