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Planning for Succession in a Living Trust

When you create a revocable living trust as part of your estate plan, it is typical to name yourself as the initial trustee. This allows you to retain maximum control over the trust assets during your lifetime. But there may come a time when you are no longer physically or mentally capable of administering the trust yourself. This is why your trust should always contain a disability clause that provides a clear method for determining when and how you may be removed in favor of a successor trustee.

Father’s “Disability Panel” Conflicts With New Wife

A disability clause may be especially helpful in cases where the person making the trust is under the undue influence of someone else. A recent case from here in San Diego offers a useful illustration of this point. This case involves a still-living man who created a trust in 1998, which he revised in 2008. Under the 2008 revision, the man appointed his three children and one of their spouses as a “disability panel” to make a “final, binding, and controlling” determination should he become disabled and unable to continue as trustee. If and when the disability panel made such a finding, one of the man’s sons would take over as successor trustee.

The man’s mental capacity “began to deteriorate” in 2011, according to court records. Shortly thereafter, he met a woman that he later married. The children were convinced this woman exercised undue influence over their father; more to the point, they thought she was after his money. In April 2013, the children, acting as the disability panel, removed their father as trustee and named the son as successor trustee. The father tried to amend the trust a month later to name his new wife as successor trustee. The children then asked a California probate court to intervene.

The probate court ultimately sided with the children. It held the disability panel acted within its authority when it removed the father as trustee. This meant he lacked the legal capacity to execute the subsequent amendment replacing his son with his wife as trustee.

But the court did note one important limit on the son’s authority. After taking over as trustee, he attempted to amend the trust to “disinherit” his stepmother. Both the probate court, and later the California Court of Appeal, said that was not permissible under state law. When a person makes a will or trust, and later gets married, California probate law automatically provides for such an “omitted spouse.” The court said the son did not have the power as trustee (or as agent under his father’s power of attorney) to exclude an omitted spouse.

Get Advice from a San Diego Estate Planning Lawyer

A trust offers a flexible vehicle for keeping your assets out of the normal probate process. But a trust also requires greater attention to detail, such as planning for a trustee’s disability or removal. That is why you should never attempt to make a trust without first consulting an experienced San Diego estate planning attorney. Contact the Law Office of Scott C. Soady if you would like to speak with someone right away.

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