The Legislature and courts endeavor to create well-defined laws, lest we devolve into the governance of Emperor Nero, who reputedly posted edicts high atop columns so as to be painfully difficult for the masses to read. As Nero surely knew, clarity in the law is critical for people to know how to act, especially when far-reaching consequences are at play. But despite our government’s best intentions to post edicts in clear print and at eye-level, ambiguities in the law often emerge when statutes are scrutinized. As this post demonstrates, the statute concerning trust modification/amendment is no exception.
In Haggerty v. Thornton (2021) __ Cal.App.5th __, the Fourth District Court of Appeal challenged the Fifth District Court of Appeal’s opinion in King v. Lynch (2012) 139 Cal.App.4th 1186 over the contours of Probate Code section 15402, which concerns a settlor’s right to modify or amend a trust. Haggerty’s rejection of the rule of law established in King creates a split of authority. This game of thrones amongst the appellate “kingdoms” eventually may find its way to “Kings Landing,” i.e., the California Supreme Court.
Precursors to the Siege
In Haggerty, Jeane Bertshe created a trust in 2015, which nominated Nancy Thornton as successor trustee. The trust instrument stated that Jeane: “reserves the following rights, each of which may be exercised whenever and as often as [she] may wish: [¶] A. Amend or Revoke. The right by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder.” Not exactly a model of clarity.
The following year, Jeane executed a first amendment providing that her niece, Brianna Haggerty, was to be successor trustee and a residual beneficiary.
Jeane changed her mind. She hand wrote an amendment in 2018 that favored the Union of Concerned Scientists and several individuals, but not Brianna. Jeane signed the 2018 amendment and sent it to her former attorney, but did not notarize it.
After Jeane died in late 2018, Brianna and Nancy filed dueling petitions concerning, inter alia, the validity of the 2018 amendment. In her petition, Brianna attempted to invoke the authority of King, which provided that, if one is specified, a trust’s modification provision must be followed in order to successfully modify a trust. Brianna thus argued that the 2018 amendment was invalid because it was not “acknowledged” as required by Jeane’s trust.
Courts of Appeal Spar Over Probate Code Section 15402
The statutes at issue were enacted in 1986.
Probate Code section 15401 concerns the revocation of trusts and provides in relevant part: “(a) A trust that is revocable by the settlor or any other person may be revoked in whole or in part by any of the following methods:
(1) By compliance with any method of revocation provided in the trust instrument.
(2) By a writing, other than a will, signed by the settlor or any other person holding the power of revocation and delivered to the trustee during the lifetime of the settlor or the person holding the power of revocation. If the trust instrument explicitly makes the method of revocation provided in the trust instrument the exclusive method of revocation, the trust may not be revoked pursuant to this paragraph.
Probate Code section 15402 is much simpler, providing: “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.”
The court in King, by a two to one majority, interpreted section 15402 to mandate following the modification procedure set forth in a trust instrument even if it is not expressly exclusive, thus making the standard to modify or amend a trust more restrictive than the standard to revoke a trust.
The Haggerty court found that the dissenting justice in King more accurately captured the meaning of section 15402. The court determined that section 15402 does not establish a different rule for modification, but rather operates like section 15401 and presumptively allows modification by a signed and delivered writing. The court therefore found that the 2018 amendment was valid because: (1) the trust instrument did not distinguish between revocation and modification; and (2) the trust’s method of modification was not explicitly the exclusive method. Under this analysis, the Fourth District Court of Appeal found the 2018 amendment to be valid under section 15401(a)(2).
The Fallout from the Appellate Skirmishes
We thus now have a split of authority as to what section 15402 requires with respect to trust modifications/amendments: the permissive approach in Haggerty, allowing amendment by the statutory method of section 15401(a)(2) unless the amendment procedure is exclusive; and the restrictive approach in King, limiting amendment to the method set forth in the instrument.
King, by the way, does not stand alone: the Third District Court of Appeal followed King in Pena v. Dey (2019) 39 Cal.App.5th 546, which was the subject of a previous blog post.
This schism will remain, perplexing probate courts and lawyers across the state, until the Legislature clarifies section 15402 or the California Supreme Court weighs in on the controversy. For now, if settlors and their lawyers want a modification/amendment procedure to be exclusive, they should explicitly say so in their trust instruments.