April 23, 2012 | Bulletin No. 998106.1

In King v. Lynch (--- Cal.Rptr.3d ----, Cal.App. 5 Dist., April 10, 2012), a California Court of Appeal considered a challenge to changes made to a trust by one of two settlors to the trust, when the trust itself specified that any changes must be made through a written instrument signed by both Settlors.  The court ruled that Probate Code Section 15402 specifies that if the trust provides for how it may be amended, then that method must be used to amend the trust and changes made differently are not valid.

Facts

In 2004, Zoel and Edna Lynch, a married couple, created a revocable trust designating themselves as initial trustees.  It provided that during their lifetimes, the income and principal of the trust would be used for their financial support.  It also specified distributions to be made to their children and grandchildren following both of their deaths.  It provided that each of their children - David Lynch, Nancy Street, Mary Turman, and Judith King - receive distributions of $100,000; and that grandchildren Sandra Lynch and Susan Lynch (daughters of another already deceased son), each receive $50,000.  The trust established David Lynch as the trustee following the deaths of both of his parents.

Another provision provided that during the joint lifetimes of Zoel and Edna, the trust could be amended “by an instrument in writing signed by both settlors and delivered to the Trustee.”

In 2006, Edna suffered a severe brain injury that left her no longer competent to handle her own affairs.  Following Edna’s injury, Zoel executed amendments to provide that with Edna no longer competent to serve, Zoel would serve as sole trustee.  Further amendments reduced the amounts of the distributions to $10,000 to each of the children and $5,000 to each of the grandchildren, and named David Lynch as the beneficiary of the remainder.

Zoel and Edna both died in 2010 and David gave notice of the administration of the trust pursuant to Zoel’s amendments.  Nancy, Mary, Judith, Sandra and Susan filed suit challenging the validity of those amendments to the trust.  The trial court ruled that the amendments were not valid and ordered the disbursements outlined in the original document to be distributed.  David appealed. 

Decision

This case would be decided by the plain language of Probate Code Section 15402, which reads: “Unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation.”  Here, the trust instrument specifies how the trust is to be modified, so for the purposes of Section 15402, “the trust instrument provides otherwise.”

“The qualification ‘unless the trust instrument provides otherwise,’ indicates that if any modification method is specified in the trust, that method must be used to amend the trust,” the court said.  Here, the trust provided that as long as Zoel and Edna were both alive, an instrument with both their signatures was necessary to modify the trust.  Zoel’s amendments lacked Edna’s signature.  Under Section 15402, the trust could only be modified with both signatures and any modifications done differently, as these, could not be valid. 

The trial court’s ruling that the amendments were invalid and ordering the original disbursements was affirmed. 

Questions

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Linda M. Monje | 661.864.3800