Thursday, July 17, 2008
Trust’s No Contest Clause Does Not Apply to Amendment—C.A.
By SHERRI M. OKAMOTO, Staff Writer
A no-contest clause in a trust instrument will not be applied to trust amendments in the absence of specific language to that effect, the Fourth District Court of Appeal held yesterday.
Reversing the decision of Orange Superior Court Judge Majorie Laird Carter, Div. Three ruled that the trust amendments’ language generally incorporating provisions of the original instrument by reference did not render the trust’s no-contest clause applicable to those amendments.
Julia C. Perrin created an inter vivos trust in 2005 which allocated $165,000 to a separate trust for the benefit of her mother upon Perrin’s death, and the remainder for the benefit of her two minor children.
In the weeks leading up to hear 2006 death from breast cancer, Perrin amended the trust, first deleting the separate trust for her mother, and then amending it to reflect gifts to her mother, sisters and brother, reducing the overall amount remaining in the trust for her children.
She died 13 days later, and the children’s guardian ad litem filed a Probate Code Sec. 21320 “safe harbor” petition for a determination that a proposed petition to invalidate the amendments related to the gifts would not be a contest within the meaning of the trust’s no contest clause.
Perrin’s sister, the trustee, opposed the petition, and Carter found that the amendments’ language purporting to confirm and ratify the trust agreement “as originally executed and as heretofore amended” incorporated the no-contest clause into the amendments.
However, on appeal, Justice Eileen C. Moore explained that, under Sec. 21305(a), a challenge to the validity of a trust instrument—other than the instrument containing the no-contest clause—does not constitute a contest unless the contested instrument is expressly identified in the no-contest clause.
She further noted that Perrin’s original trust document did not explicitly state that a contest to an amendment would violate the no contest clause.
Citing the Court of Appeal’s decision in Estate of Rossi (2006) 138 Cal.App.4th 1325, Moore concluded that trust beneficiaries whose shares were diminished by trust amendments were entitled to a “safe harbor” declaration that their challenge to a trust amendment would not cause the forfeiture of their shares of their mother’s trust.
“[W]e do not mean to say that a trust amendment could never be drafted in such a manner as to clearly incorporate a no contest clause contained in the original trust instrument into the amendment itself,” Moore wrote, reasoning instead that the language in the amendments at issue merely served to indicate Perrin’s intent that the unamended terms of the trust continue in full force and effect.
Justices Richard D. Fybel and Raymond J. Ikola joined Moore in her opinion.
The case is Perrin v. Lee, 08 S.O.S. 4213.
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