Legal Question in Wills and Trusts in California

My husband is an only child. His parents had a living trust which named him as the trustee. They were both in their 80's and passed away this year within a few months of each other. My husband had previously seen an earlier version of the trust from twenty years ago where he was listed as the beneficiary and trustee when his parents died. After their deaths he discovered that their lawyer had convinced them last year that changes to the 2013 tax laws were going to result in large increases in inheritance tax, and had them add an amendment setting up an irrevocable dynasty trust as the beneficiary, he is listed as the sole trustee on that new trust, and he is now trustee on the living trust. Their estate was less than 2 million dollars and there would have been no inheritance taxes owed. Almost all of the estate is capital gains, in stock and home appreciation, and the dynasty trust exposes that to capital gains tax on sale of the assets, which previously would not have applied as he would have inherited with a new basis. His parents never understood this, his father told him shortly before he died that no taxes would have to be paid because of the trust. In short, the amendment is completely irrational in terms of estate planning. The only person who benefited from it was the lawyer, who charged them a couple of thousand dollars to draw it up. The living trust contains clauses to the effect that anybody who challenges any part of it gets nothing.

Both his parents and we live in California. How should he go about cleaning up this mess - is there some not too painful way to petition to have that amendment thrown out, as it is insane, without triggering that poison pill clause in their living trust? My husband does not want to spend years in court and tens of thousands of dollars on lawyers, but neither does he want to be bound by that crazy amendment. The whole thing is incredibly frustrating - handling their estate would have been easier and less expensive had they died intestate!

Asked on 8/27/13, 10:15 am

3 Answers from Attorneys

Anthony Roach Law Office of Anthony A. Roach

You need to take all the paperwork in and see a decent probate and trusts litigation attorney. You will have to either take the risk and challenge the amendment and risk being disinherited, or live with it. The fact that you mention that the attorney profited from this is of some concern.

There is an attorney who posts on this site named Jennifer Rouse, and she knows what she is doing with issues like this. I think she is in the Sacramento area. I suggest giving her a call, and if it is too far for her, see if she can give you a recommendation for someone close to you.

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Answered on 8/27/13, 10:39 am

Charles Perry Law Offices of Charles R. Perry

Without reviewing the trust document, the no-contest clause, and the estate of your husband's parents, it is not possible to tell you whether the clause can be thrown out. A competent probate lawyer can assist you here.

It may be that your husband's parents were taken advantage of by someone who is less than scrupulous. As a result, it may be that a consultation with an attorney who handles malpractice claims and/or elder law matters is also in order. I understand your unwillingess to invest money in this project, but you may not have much of a choice.

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Answered on 8/27/13, 2:01 pm
Victor Waid Law Office of Victor Waid

The previous answers by attorneys Roach and Perry are good advice. You appear to live in the San Jose area according to the zip code listed; yuo would be advised to seek the assistance of a probate litigation lawyer in that area, that can help you unwind this dynasty trust and maybe leave the original trust remain effective. However. assuming you are the only beneficiary under both trusts, you may be able to have the attorney petition the court to set asside the dynasty trust on ground settlors did not comprehend the legal effects of their actions of executing the dynasty trust; but if the dynasty trust has remainder beneficiaries beyond yourself, then additional legal work will require either agreement of all potential beneficiaries to set aside the trust, or an appointment of independent counsel for the other beneficiaries may be required especially if they are minors to settle this matter appropriately with the appropriate protections. However, this does not necessarily resolve any potential tax liability to the IRS; you would be advised to obtain clearance of all actions with the IRS, before committing to any changes of the present trusts in place.

By the way, you need to set aside your antipathy for lawyers, as as they have and perform very valuable services for clients and the public, as do medical doctors. This is not to say lawyers or doctors to do not make mistakes; we do make mistakes in the performance of our professions.

Go forward with a positive attidude and you will be able to resolve this matter to your satisfaction with the appropriate legal assistance.

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Answered on 8/28/13, 3:08 pm

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