Estate planning is supposed to prevent arguments among family members after you pass away. But even the best-laid plans are subject to changes in family relationships. One recent California appeals court decision highlights what can go wrong when a deteriorating marriage intersects with inheritance.
Please note this case is described here for informational purposes only and should not be construed as legal advice. The subject of this case is a home in Alameda County owned by the late Henry Rodriguez. In the late 1990s, Rodriguez asked his niece, Mirian Duncan, and her husband Edward to move into his home. Rodriguez had recently underwent heart surgery. He wanted the Duncans to help care for him and his home. In exchange, he promised to give them the house after he died this is known as a care contract.
To that end, Rodriguez executed a revocable living trust in 1998. Rodriguez transferred his house into the trust and directed that upon his death, the property would go to the Duncans “equally, as their joint and/or marital property.” The Duncans held up their part of the deal, moving into the home and caring for Rodriguez until his death in 2007.
Unfortunately, by that time the Duncans marriage had deteriorated. According to Edward Duncan, the year before Rodriguez’s death, Mirian Duncan and her two siblings caused Rodriguez to modify his 1998 trust, naming the three of them as beneficiaries to the exclusion of Edward.
Edward Duncan eventually sued his wife, individually and as successor trustee for the Rodriguez trust, for breach of contract and a dozen other claims. An Alameda County Superior Court judge held a bench trial in 2010. He decided Edward Duncan did, in fact, have a one-half interest in the house pursuant to his earlier agreement with Rodriguez. In other words, Edward Duncan had “lived up to his end of the bargain” by moving into the house and caring for Rodriguez, and furthermore Duncan spent some of his own money relying on the promise he would later receive one-half of the property. The judge said Duncan was also entitled to $50,000 in punitive damages from his wife.
An Open Case
Mirian Duncan appealed the judge’s decision to the California Court of Appeal. That court dismissed the appeal because the trial judge’s decision was incomplete. Edward Duncan raised a number of questions under California’s family law statutes, none of which the trial judge addressed. The appeals court was also confused by the trial judge’s decision to award punitive, but not compensatory, damages. In any event, since the judgment was not complete, it was not “final,” and therefore not subject to immediate appeal.
This case has already been in the court system for several years, and it appears destined to remain there for several more. It remains unclear whether the amendment of Rodriguez’s trust constituted an act of fraud against Edward Duncan. The appeals court will likely revisit this question again someday.
A general lesson we can draw from this case is that certain promises made within the context of a living trust may form a binding contract with third parties. If any change is to be made to the trust, it’s imperative you consult with an experienced San Diego estate planning attorney who can advise you of the potential pitfalls and consequences. If you have any questions regarding living trusts, or any other aspect of estate planning, contact the Law Office of Scott C. Soady in San Diego today.