A revocable living trust is a flexible estate planning device that allows you to transfer your property to a trustee--usually yourself--thereby reducing those assets subject to a court-supervised probate after your death. Your trust document names a successor trustee to assume responsibility for the trust assets after your death. And as the name implies, a revocable living trust may be modified or revoked at any point during your lifetime.
But what about after your lifetime? Does a successor trustee have the right to modify the terms of your trust? That was the question before a California appeals court recently, which had to decide whether the spouse of a deceased trust grantor could alter the distribution of assets he specified.
Wright v. Tufft
James and Mary Tufft signed a revocable living trust in 1997. Although they served as co-trustees, all of the assets in the trust were originally the separate property of James Tufft (as opposed to marital property owed by both of them). The Tuffts had no children together but each had children from prior relationships. James Tufft’s trust stated that upon the death of both his wife and himself, all trust assets would be divided among his two daughters; Mary Tufft’s own three children would not inherit anything from the trust.
However, about 10 years after her husband died, Mary Tufft, now serving as sole trustee, modified the trust to name one of her children, Linda Wright, as successor trustee and naming her children as beneficiaries, while disinheriting her late husband’s children.
Mary Tufft died in 2012. Wright then asked a California probate court to name her successor trustee pursuant to her mother’s amendment. Margaret Tufft, one of James Tufft’s children, objected to the petition. She argued, under the terms of the original trust, she was the lawful successor trustee to Mary Tufft, and her stepmother had no authority to alter that. Furthermore, the trust became irrevocable upon James Tufft’s death, and therefore Mary Tufft also could not alter the distribution or beneficiaries.
The probate court agreed with Margaret Tufft and rejected Wright’s petition. The California Court of Appeals, in a decision issued on July 28 of this year, agreed that Linda Wright had no claim to be the successor trustee. The appeals court said nothing in the language of the trust authorized Mary Tufft, acting as the surviving trustee, to appoint her daughter as she did. Nor was there any provision giving Mary Tufft the power to revoke or amend the trust in any substantial way after her husband’s death. There was nothing ambiguous here. James Tufft clearly intended for his own children to receive the trust assets after he and his wife died.
Drafting a Proper Trust
As this case shows, the common practice in drafting a revocable living trust is that it becomes irrevocable after the settlor’s death. But careful drafting of the trust is essential to avoid any confusion on this point. That is why, if you are thinking about creating a living trust for your own assets, you should work with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady today if you have any questions.