The California Supreme Court recently addressed the complexities surrounding trust amendments in the case of Haggerty v. Thornton (2024) 15 Cal.5th 729. The case settled the confusion over potential conflicts between trust language setting forth procedures to amend a trust and the statutory procedures. The case also settled a split of authority among the court of appeals regarding this interplay.
Trusts often contain language about how to modify or revoke a trust. The Probate Code also contains explicit rules for modification or revocation. Often questions arise as to which procedures should be followed to amend a Trust. The conflicts revolve around questions such as if a Trust stated how it could be modified did that mean that was the only procedure for modification. Or would the probate code’s default rules still apply.
The California Supreme Court took up these issues of potential conflicts, and settled the confusion. In Haggerty v. Thornton, the Trust’s language at issue stated: “The right by an acknowledged instrument in writing to revoke or amend this Agreement or any trust hereunder.” (citing the underlying appellate case).
The amendment in question of the Trust was not notarized. As a result, the disinherited party challenged the validity of the amendment for failure to comply with the Trust’s terms. However, if the statutory methods of modification were authorized then the Trust amendment would stand.
The case and prior split of authority all revolved around a single sentence in the Probate Code governing modifications:
“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.”
Prob. Code, § 15402.
This one sentence had spawned three inconsistent interpretations by the Court of Appeals. The culprit was the opening language “unless the trust instrument provides otherwise…” Did this mean that if the trust provided for a modification procedure then that alone governed? Or would that be the rule only if the trust made that modification procedure the only procedure? Or could it also mean that if the Trust also distinguished the means for revocation then that would also then limit the modification rights of the settlor?
The Court ultimately concluded the Probate Code procedures for modification could be exercised even when the Trust provides for a way to modify the Trust, unless the trust “explicitly made it exclusive”. The ruling was based on, among other things, the Commission’s commentary and the public policy considerations aimed at honoring the settlor’s intentions.
Because the Trust at issue did not expressly state it could only be amended based on an acknowledged/notarized amendment, the amendment was enforced. The ruling was also made retroactive so as to apply to any prior Trusts drafted based on any prior law, which was now disapproved.
This settles a great deal of uncertainty and recent litigation over amendments. The issue remains however for estate planning attorneys to analyze ongoing Trusts to ensure any revocation or modifications are done in strict accordance with the Trust terms if they are exclusive. And if there is any ambiguity whether the Trust is creating an exclusive procedure for revocation or amendment, then the correct course of action will likely be to comply with the Trust terms and statutory basis for amendment set forth in Probate Code section 15401. Finally, as for the drafting of any initial Trust it should be drafted with clear and precise language over its procedures, including the future revocation and amendment of its terms.
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