PROBATE AND TRUST DISPUTES
Causes of Probate and Trust Disputes
If probate administration is straight forward and trust administration is expeditious (as mentioned on the Probate & Trusts page), how can disputes be as prevalent as they are? There are a number of reasons. First, is delay. Heirs get annoyed with delay in getting estate assets accounted for and distributed. This is understandable. Delay in accounting for assets raises suspicions about whether assets have been “lost,” misused, or misappropriated. As for a delay in distribution, it goes without saying that people want what they’re entitled to now -- or at least without unnecessary delay.
Sibling issues fuel many disputes. Typically the problem arises after the second of two elderly parents passes away. When the first parent passes away, the children rally around the survivor and work generously and cooperatively in support of that parent. However, when the surviving parent dies, so does the common goal that bound the siblings. “Issues” that have been held in check for decades can emerge to be addressed once and for all. If the differences appear irreconcilable (and many appear so initially), matters can move quickly to the lawyers and then to the courtroom.
Types of Disputed Probate and Trust Issues
Most of the disputes are not frivolous. Many raise legitimate questions: Did undue influence play a role in the benefactor’s chosen estate plan? Should a property be distributed to the heirs, retained for appreciation, sold with everyone being cashed out, or retained long enough so one heir can arrange for financing and buy out the other’s interest and at what price? If trust assets are to be distributed, who should get which assets? Should broker “X” be hired, considering that he’s related to party “Y”? What should the asking price be for the property? How long should it be held at that price? Should an heir be permitted to continue residing in the trust or estate property and, if so, what rent should be charged, if any?
Trust Administration Issues
There are probate and trust administration issues. For example, what happened to inventoried and uninventoried items of jewelry, or other property? Should the trustee be removed for not providing a timely account, or for delaying the distribution of assets and terminating of the trust? Are the trustee’s fees reasonable? The list goes on.
Use of the Probate Court to Expedite Resolution of Trust Disputes
Certainly the parties should try to resolve differences on their own or with the help of attorneys who can adequately advise as to available courses of action. But if the negotiations are unsuccessful, the probate court can be very useful.
It was pointed out on the Probate & Trusts page that the superior court handles the probate of estates, which can be time consuming and needlessly expensive and that setting up a living trust to distribute property can expedite the process and reduce fees. However, in California, if a dispute arises over a trust matter, it is the probate court that has jurisdiction to resolve it.
Fortunately, it is not necessary to submit the entire trust administration to the court’s jurisdiction. One can petition the probate court for an order resolving a single issue: one petition, one hearing, one order, and that’s it. The rest of the trust administration can remain private.
There are many types of trust problems that can be solved through the probate court. For example, in a recent trust case handled by this office, the two beneficiaries found the appointed trustee, a local bank, to be high handed and obnoxious. The feelings may well have been mutual. The bank boldly gave notice that it intended to resign but would continue serving until the beneficiaries found a corporate trustee as a replacement. The trust instrument required a corporate trustee. Unfortunately for the beneficiaries, it seemed unlikely they could find a corporate trustee willing to replace the bank in this particularly contentious case. So, the bank would continue to serve as trustee and continue to earn fees, the rancor notwithstanding.
Relief for the beneficiaries seemed even more unlikely because the trust by its terms had become “irrevocable.” An irrevocable trust ordinarily cannot be revoked or amended. However, this office obtained a probate order amending the trust anyway. The amendment removed the corporate trustee requirement. The court then appointed the two beneficiaries as co-trustees replacing the "resigning bank". The beneficiaries, now acting as co-trustees, quickly wrapped up administration of the trust and distributed the assets to themselves, all without the need to pay further trustee fees.
The mere availability of the probate court’s jurisdiction helps the negotiation process in the event a dispute arises because the parties come to realize they can quickly be called to task for maintaining unreasonable positions. So, even though the majority of trust and probate issues can be resolved without rulings from the court, it’s still good to know that judicial relief is readily available.