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The Risks of Naming an Heir as Personal Representative or Trustee

In an ideal world, estate planning would prevent disputes among your family members after your death. But even the best-laid estate plans can fall victim to squabbling heirs who use the court system to air their grievances over a period of months, if not years. In extreme situations, litigation can deplete the very estate you hope to leave to those same fighting heirs.

A recent California appeals court decision-actually, the third such decision arising from the same disagreement-provides a cautionary tale in estate planning gone wrong. This case is discussed here for informational purposes only and should not be construed as legal advice or a comprehensive statement of California law.

Trumble v. Schooler

Rowena Schooler died in 2004. She had six adult children. Schooler’s estate plan included a will and a living trust. Schooler named one of her children, Jane Schooler, as successor trustee and personal representative of her estate.

The will provided that all of Schooler’s property would pass to her trust. The trust assets would then be distributed equally among five of Schooler’s children. The trust and will each contained “no-contest” provisions, which disinherited any child who attempted to challenge the validity of either document in court.

After Schooler’s death, three of her sons asked a probate judge to remove their sister Jane as successor trustee and personal representative. They claimed she had breached her fiduciary duty as trustee and failed to provide a proper accounting of their mother’s estate. Eventually, after several hearings and two visits to the court of appeals, Jane Schooler was removed as personal representative and trustee. (The court found the “no-contest” clauses inapplicable.)

Jane Schooler continued to litigate, however, culminating in a third decision from the appeals court this past November 15. The court not only found Schooler’s appeal “frivolous,” it ordered her to pay more than $18,000 sanctions to her brothers, and her attorney was ordered to pay the court $8,500. The court said Schooler’s previous “derelict administration of the trusts and the estate,” combined with nearly six years of drawn-out litigation justified the remarkable sanctions order.

Who Will Manage Your Estate?

Jane Schooler is herself an attorney, which may have been why her mother named her as personal representative and successor trustee in the first place. A working knowledge of the law is certainly a useful quality for a personal representative. But it’s not necessarily the most important qualification. A fiduciary acts in your name to ensure your wishes are carried out after your death. It’s essential you appoint someone who is competent and trustworthy.

In a situation where you want to provide for multiple heirs, it may be inadvisable to name one of those heirs as a fiduciary, particularly if your estate includes complicated assets like real property or brokerage accounts. In some cases, successor trustees are private professional fiduciaries that impartially manage assets. Some persons also choose to name an outside person as personal representative to ensure there is a “neutral” party to referee any disagreements among heirs.

Every estate planning situation is unique, of course, and there is no one-size-fits-all approach. That’s why your first step should always to be speak with an experienced California estate planning attorney who can help you weigh all of your options. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.

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