Trust Court Cases

This page consists of copies of actual probate court petitions (and associated documents) that were filed in California Superior Court, County of Orange. As a courtesy to the families, certain information in the petitions (and associated documents) has been blacked out. Also, each petition is preceded by a "Document List," "Case Summary" and "Comments."

The first 4 cases below involve petitions that were obtained from a trust study conducted in May of 2000. To read about this study, click on the colored words "About Us" near the top of this page. Then (on the "About Us" page), click on the red box titled "An Interesting Trust Study!" for the details.

You will notice that all of the cases below involve petitions which were filed in 1999. Don't be alarmed by this fact. THE SAME TYPES OF TRUST PROBLEMS ARE BEING REPEATED IN GREATER NUMBERS YEAR AFTER YEAR!

Case 1


[2] "DECLARATION OF TRUST"; page 1 only

[3] "Verified Objections To 17200 Petition"; December 1999 filing date

"Lois" created her trust in 1988, and she died in 1997. The trust designates her son "Carl" and her stepdaughter "Doris" as successor trustees and equal beneficiaries. However, in 1997, just 2 weeks after the death of Lois, her stepdaughter Doris also died!

Section 2.07B of the trust reads, "If either beneficiary for whom a share of the Trust Estate has been set aside should die prior to the above distribution, the Trustee shall distribute all the balance of such deceased beneficiary's share of the Trust Estate to Creator's living beneficiary." Although this language by itself seems to indicate that Carl should inherit all of the trust estate, an attorney representing "Jon" and "Jennifer," who are the surviving children of Doris, has taken the position that they "are a 50% beneficiary" of the assets.

Now, as sole successor trustee, Carl is petitioning the probate court "To interpret the Trust and to ascertain the beneficiaries" of the trust estate. The October 1999 petition filing date is nearly 2 years after his mother's death.

In the "Verified Objections to 17200 Petition" prepared by the law firm representing Jon and Jennifer, it is stated that "the erroneous interpretation of said trust" by Carl is preventing these children from receiving their deceased mother's share of the trust estate. The objection is based on (but not limited to) the belief that "Said trust contains ambiguity involving who are the beneficiaries, which requires a consistent interpretation of said trust which requires a consideration of at least paragraphs 2.01, 2.02, 2.03, 2.04, 2.07C, 2.07D, 3.07 and not just 2.05 and 2.07A and 2.07B referred to in said petition paragraph 10."

Every provision (or section) in a trust should be in HARMONY with all of the other provisions. Often, when one provision is altered, numerous other provisions must also be changed! Ambiguous or conflicting trust provisions (or language) can easily "slip by" trust providers who are preparing large volumes of documents. It is also quite common for legal assistants to prepare trusts without proper supervision!

Case 2

[1] "PETITION FOR INSTRUCTIONS"; April 1999 filing date

[2] "Declaration of Trust"; pages 1 and 2 only

"Amparo" created her trust in 1990, and she is still living. However, she suffered a stroke and was no longer able to serve as a trustee with Northern Trust Bank of California. That's when the Bank and 3 individuals (most likely her children) began serving together as trustees.

The trustees are now petitioning the probate court for instructions which would allow them to make annual gifts to 7 individuals in order to reduce Amparo's taxable estate before her death. According to the petition, she has been making such gifts "for the past eight (8) years." Regardless, Amparo is now incapacitated and "The TRUST does not expressly provide for the gifts" to be continued. The trustees are seeking a judge's approval before they start gifting.

Many trusts DO NOT contain the necessary instructions, options or powers which trustees need to resolve the situations or problems often encountered after a trust holder becomes INCAPACITATED! Amparo's case is a good example of how a trust can end up in probate court before the trust holder dies. The trustees would expose themselves to financial liability if they distribute gifts without judicial approval.

Case 3


[2] "DECLARATION OF TRUST"; page 1 only

"Beatrice" executed her trust on May 18, 1993. On the same day, she signed a "Trust Transfer Deed" to put her personal residence into the trust. However, in 1998, Beatrice was required by a lender to execute "a GRANT DEED conveying the subject residence out of the trust back to herself as an individual" in order to obtain a refinance loan. Then, later in 1998, she died without the property being put back into her trust! "A ‘deed back into the Trust’ was never provided by the lender nor the loan escrow as promised to decedent and title remained in decedent's name as an individual."

After Beatrice's death, her daughter "Laura," as successor trustee, "distributed the trust assets to herself and her sister and desires to transfer the residence to herself and her sister, but has been advised by attorneys for Title companies, that they will require an ‘exclusion order’ from the Probate Court excluding the residence from decedent's estate in order to issue Title Insurance" for the transfer.

Laura is now petitioning the probate court to obtain this "exclusion order" from a judge. Her attorney is comparing Beatrice's situation to "the case of ESTATE OF HEGGSTAD 1993" as the applicable case law. Also, the attorney notes that, in 1994 and 1997, he "sought and was granted an exclusion order" in similar situations "where a lender required a ‘deed out of a trust’ as a condition of a refinance of a residence."

The petition also states that, with respect to Laura and her sister, "Their only motive is to have clear title now rather than a year from now and to save the approximately $4,000 in statutory attorney fees." This language is referring to the alternative legal action which will be necessary if the requested exclusion order is not granted by the judge. By obtaining the exclusion order now, the residence will be ruled to be part of Beatrice's trust estate. In contrast, a denial would result in a more lengthy and costly probate court procedure. Such a procedure (estimated at a cost of $4,000 in attorney fees!) would transfer the residence from Beatrice's personal estate to the trust estate by means of her "pour-over" will.

This type of petition (which is called a "Heggstad petition" by probate attorneys) is becoming more and more prevalent. Most often, a successor trustee must use this petition because real estate deeds or stock certificates (or accounts) are titled in an individual's name (instead of his or her trust) when death occurs.

There are three important lessons that can be learned from Heggstad petitions. First, even though an asset is listed (or typed) on a trust exhibit (or schedule) page, this action DOES NOT transfer the asset into the trust! Instead, some type of transfer document (such as a quitclaim deed or stock assignment form) must be executed to effect the transfer!

Second, unless a trust holder is having mental or physical problems, he or she SHOULD NOT rely on anyone's word or promise concerning the transfer of assets into their trust! Beatrice herself should have conducted the follow up on the transfer of her residence back into the trust. Physical evidence (or proof) for every trust transfer needs to be obtained!

Finally, as a precautionary measure against lawsuits, financial institutions (especially banks and stock brokerages) routinely require a probate court order before they will transfer a relatively high value asset from a decedent's individual name to the successor trustee of a trust. In the case of Beatrice's residence, a title insurance company will not issue a title policy (insuring the transfer from Beatrice's name to Laura and her sister as trust beneficiaries) until an exclusion order is received from a probate court.

Case 4



"Margaret" and "Theresa" established a joint trust in 1992. Then, in 1995, Margaret passed away first, followed by Theresa's death in 1998. The trust names 2 beneficiaries only. "Julian" is designated "as life beneficiary" and the St. Nicholas Catholic Church is designated "as remainderman." The trustee is instructed to use the assets for Julian's lifetime care; then, after his death, the St. Nicholas Catholic Church will inherit the remainder of the trust estate.

Also, "The Trust provides that upon the death of both settlors, Security Pacific National Bank, or its successor in interest, shall act as trustee of this Trust. Bank of America, as successor in interest to Security Pacific National Bank, declined to act as the successor trustee of the trust, thereby leaving a vacancy in the role of trustee."

Now, "Eugene," who is the "Attorney-in-Fact" for Julian, is petitioning the probate court to be appointed as successor trustee. The attorney who prepared the petition builds a strong case for Eugene to be appointed instead of a corporate trustee. Eugene is described as "a person who possesses the best of both worlds: he is capable of handling the financial dealings and managerial obligations of Trustee, yet he also possesses the compassion and interest in Julian" as the beneficiary.

Because of the expertise associated with corporate trustees (such as bank trust departments), many individuals have named such institutions as successor trustees in their trusts. Very few of these individuals, however, have given any thought to the possibility that the respective corporate institution may decline to serve in the trusteeship! This is exactly what Bank of America did concerning the trust created by Margaret and Theresa. Fortunately, Julian has a capable friend in Eugene.

Whenever a corporate institution is desired as a successor trustee, the institution itself should be visited BEFORE the trust document is completed! A corporate trustee may not want to serve because (but not limited to) the trust estate (1) has a relatively small value or (2) contains various assets which might cause administrative problems. For example, an ongoing business or possible contaminated land will prevent many corporate institutions from accepting a trustee position.

A trust document should always be drafted with the anticipation that every named successor trustee (individual and corporate) will decline to serve! Such anticipation will alert the draftsman to include trust language that will allow the beneficiaries to fill a void in the trusteeship without petitioning a probate court.

Case 5

[1] "PETITION FOR INSTRUCTIONS TO TRUSTEE"; January 1999 filing date

[2] "TRUST AGREEMENT"; pages 1 and 2 only

In 1968, "Paul, Sr." created a trust in which his daughter "Marjorie" and son "Paul, Jr." (hereafter referred to as Paul) were designated as the primary and immediate beneficiaries. Paul was also named as the original trustee and has been serving as trustee ever since. Marjorie died in 1995, survived by her only son "James" and his children.

Before Marjorie's death, and in accordance with the discretion conferred on him by the trust, Paul distributed $121,681 more to himself than to Marjorie. The excess distributions were made "in part on account of serious illness which he suffered" and "with the knowledge of MARJORIE" as the other beneficiary. When Marjorie died, Paul was instructed (by the trust language) to divide the remaining trust estate "into two equal shares subject to an adjustment for any unequal distributions that were made." One of the shares is for Paul and the other share (which should be $121,681 larger because of the excess distributions received by Paul) is for Marjorie's issue (James and his children).

For some reason, Paul is now finally making (in 1999!) the required division of the remaining trust estate into the 2 unequal shares. James, unfortunately, "is in dire need of money, being presently incarcerated in Corcoran State Prison for a term believed to be twenty-five years and having little or no income for the support of his wife and children." Because of this sad situation, Paul wants to distribute $121,681 of trust funds to James (in care of his lawyer) "in order to equalize the distributions between" himself and Marjorie.

Paul has confronted an obstacle that is preventing him from helping James monetarily. Specifically, the trust document does not include language which allows the trustee to distribute assets to Marjorie's heirs (or issue) during Paul's lifetime! Instead, with respect to a share of the trust estate allocated to the issue of a deceased child of Paul's father (the trust creator), the share "shall be held for the use and benefit of the issue of that child" of the trustor. There are simply no provisions for distributing trust funds to James or his children until Paul dies!

This deficiency in the trust has forced Paul to petition the probate court so he can (1) make the much needed $121,681 lump sum distribution for James and (2) make additional (and equal) distributions "of net income and principal in the discretion of the trustee to, or for the benefit of, himself and JAMES" while both are living.

Trust provisions which apply to grandchildren or great-grandchildren are equally as important as those pertaining to children! When preparing a trust document, it should be PRESUMED that, because of the potential for a succession of deaths, each generation will become the immediate income and principal beneficiaries of the trust estate. Successor trustees often submit probate court petitions to receive instructions concerning secondary beneficiaries, such as James and his children.

Could Paul (as trustee) distribute the cash for James without obtaining a judge's approval? Yes, he could, but such action would also expose him to a possible lawsuit from James' children. These individuals (1) would become the successor beneficiaries of Marjorie's share in the event of their father's untimely death and (2) would have every right to sue Paul for distributing funds without having proper trust instructions.

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Note: The contents of this page is not intended to be legal or tax advice.