Just about a year ago, I examined the case of In Re Gregory Hall Trust, No. 361528 (Mich. Ct. App. March 16, 2023) In Hall, the upper court affirmed a lower court opinion holding that a spreadsheet created by the decedent years after executing his Estate Plan and prior to his death constituted an amendment to his Trust, notwithstanding that the document was not in the form of a typical Trust amendment and notwithstanding that it did not conform exactly to the terms of amendment set forth in the Trust. Earlier this year, the Supreme Court of California examined a similar case, Haggerty v. Thornton, San Diego County Superior Court 37-2019-00028694-PR-TR-CTL (February 8, 2024), and allowed a handwritten amendment of a Trust which failed to follow the method for modification set out in the Trust itself. Let’s explore.
Jeane Bertsch (“Bertsch”) created a revocable trust in 2015 naming an accountant and professional fiduciary as her successor Trustee. The Trust left several bequests to friends and family members, including $50,000 to her niece, Brianna Haggerty (“Haggerty”). The terms of the Trust split the remainder after the specific distributions between two non-profit organizations. In 2016, Bertsch amended the trust naming her niece as the successor Trustee in place of the accountant and increasing her niece’s bequest by naming her as remainder beneficiary of the Trust in place of the non-profit organizations. Sometime thereafter, Bertsch had a disagreement with Haggerty and subsequently created a handwritten amendment in 2018 removing Haggerty as beneficiary and fiduciary. The 2018 amendment was signed by Bertsch, but it was not notarized. Bertsch sent the amendment to the attorney who had drafted the Trust and the 2016 amendment along with a note to the attorney to place the document with her Trust and noting that the attorney could verify her handwriting. Bertsch died in late 2018.
Shortly after Bertsch died, Haggerty and the successor Trustee named in the 2018 amendment submitted competing petitions to the probate court both asking to be named as successor Trustee. Haggerty’s petition alleged that the handwritten document was invalid because it was not notarized and therefore not “acknowledged” as required by the Trust. Of note, the Trust contained the following reservation of rights: “[t]he right by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder.” The probate court found that the Trust amendment was valid. Haggerty appealed that decision to the Court of Appeal, Fourth Appellate District, Division One. The Court of Appeal affirmed the lower court’s decision holding that the 2018 amendment was a valid modification pursuant to the statutory method.
California Probate Code Section 15402 provides that “[u]nless the trust instrument provides otherwise, …the settlor may modify the trust by the procedure for revocation” which is set out in California Probate Code Section 15401. That section allows modification as provided in the Trust instrument and explains that if the Trust clearly declares that method exclusive, then the Trust may not be modified in any other way. Absent such a clear instruction, the Trust may be modified as set forth in the California Probate Code. The California Supreme Court affirmed the Court of Appeal decision holding that because “the method of revocation and modification described in the trust agreement is not explicitly exclusive” Bertsch modified her Trust under the procedure set forth in the statutory method which allows modification by “a writing, other than a will, signed by the settlor…and delivered to the trustee during the lifetime of the settlor…” Bertsch’s handwritten amendment met the statutory requirements and therefore was a valid modification under California law. For those interested, the California Supreme Court does an excellent job detailing the various lower court holdings, reviewing the applicable statutes, and pulling it all together: https://cases.justia.com/california/supreme-court/2024-s271483.pdf?ts=1707415308.
Without question, this case will have a lasting impact on Trust modification in California.
This case, like Hall, demonstrates that courts have begun moving away from strict adherence to the methods of amendment set forth in a Trust agreement itself in favor of complying with the deceased Trustor’s probable intent when evidence exists supporting that intent. While it’s possible to find opinions that require strict compliance with the terms of the Trust or applicable statute, Hall and now Haggerty mark a shift toward “substantial compliance” under the statute. Of course, this shift could result in increased litigation or dispositions that fail to meet a decedent’s true intent which makes proper Estate Planning with a qualified Trusts and Estate practitioner all the more important. Don’t leave your legacy to chance. Make sure that your Estate Plan says and does what you want it to do. After all, you never know when a disgruntled beneficiary may try to obtain more or less than the share to which they are entitled under your plan. Let me ensure that you have left nothing to chance and that your estate will pass to your intended beneficiaries.