Protect Your Trust Beneficiary Interest

How to Protect Your Trust Beneficiary Interest in Probate

Updated on August 10, 2021

Do you need help to protect your trust beneficiary interest in probate court? For beneficiaries of trusts in California, looking out for your rights means participating in the court proceedings and making the proper objections. Failing to do so may be a costly decision.

Section 17200 Petition

In California, Section 17200 of the Probate Code provides trustees and beneficiaries a number of rights. Under that section, a trustee or beneficiary of a trust can exercise the right to file a petition to determine the validity of trust provisions, make demands on the trustee, or remove a trustee, among many other key privileges. The code also provides considerable protection to trust beneficiaries. In particular, Section 17203 requires that anyone making a Section 17200 petition would be required to give notice of the hearing on the petition to all trustees and beneficiaries.

However, two recent cases in California signal a clear departure from past law and practice. The lesson is clear: family members and other beneficiaries should fully participate in probate proceedings to protect their interests. Otherwise, the court may deem the beneficiaries to have forfeited their right to object to the resolution.

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Protect your Trust Beneficiary Interest in Probate: Why You Should Participate in Court Proceedings Even If You Did Not Bring the Claim

In Smith v. Szeyller (2019) 31 Cal.App.5th 450, an elderly couple established a family trust benefitting their five children equally. After the parents passed away, leaving $14 million in combined trust assets, the trust beneficiaries disputed the management of the trust and the distribution of the assets.

Don Jr., one of the children, challenged his sister, Joann and her husband, Edward, who served as co-trustees of the trust by making petitions and objections. The other siblings had notice of the litigation proceedings but did not participate.

Following five days of trial, Don, Joann, and Edward resolved the litigation by a stipulated settlement that included an agreement to award Don $721,258.28 for attorney and expert fees and costs. The court approved of the parties agreement to provide the award to Don from the trust estate’s assets––even though those assets also belonged to the beneficiaries who did not participate in the litigation and settlement.

One of the nonparticipating beneficiaries appealed the decision. But the Court of Appeal agreed with the trial court that the nonparticipating beneficiaries would be bound to the stipulated agreement. The Court of Appeal held that the nonparticipating beneficiary had forfeited her objections to the fee award when she did not object to Don Jr.’s petitions and objections. She “chose not to participate in the trial and cannot now second-guess the resolution of Don’s objections.” The Court of Appeal upheld the $721,258.28 fee award to Don Jr.

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Breslin v. Breslin: Why You Should Participate If You Are Notified of Court-Ordered Mediation in Probate Court

In the California Court of Appeal’s recent decision, Breslin v. Breslin, (Jan. 26, 2021, B301382), which has been certified for publication, the generous decedent left his three- to four-million dollar estate to a number of charitable organizations listed in exhibit A to his restated trust. The problem was that exhibit A to his restated trust was missing.

The trustee did find a separate list of 24 charities in the pocket of a estate planning binder containing the restated trust. He petitioned the probate court to determine the identity of trust beneficiaries and noticed all 24 charities and the decedent’s intestate heirs. The probate court ordered the matter to mediation among the interested parties to work on their agreed distribution of the estate.

Only five of the listed charities appeared at the mediation. The intestate heirs also appeared. The parties reached a settlement and the court approved of the settlement.

Chosing Not to Participate to Protect Your Trust Beneficiary Interest in Probate

Potential beneficiaries received notice of the mediation, but some of the beneficiaries chose not to participate. The beneficiaries who did participate in the court-ordered mediation reached a settlement. Nine of the charities that did not participate in the mediation objected to the settlement and appealed the probate court’s decision to approve the settlement.

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The Court of Appeal held that the nine non-participating charities lost their rights by failing to participate at the mediation where they received notice of the date, time, and place of the mediation. Citing Smith v. Szeyller (2019) 31 Cal.App.5th 450, the Court of Appeal stated:

“Non-participating persons or parties who received notice of the date, time and place of the mediation may be bound by the terms of any agreement reached at mediation without further action by the Court or further hearing [citation omitted].Rights of trust beneficiaries or prospective beneficiaries may be lost by the failureto participate in mediation.”

The Court of Appeals’ recent holdings provide a clear message that trust beneficiaries should not ignore probate court proceedings. Just as importantly, beneficiaries should seek legal representation to ensure that their claims and objections are validly asserted. Schorr Law is experienced in handling analyzing such disputes and in handling probate disputes involving real estate. For help with your real estate matter and to see if you qualify for a free 30-minute consultation, contact us by phone at (310) 954-1877 or by email at [email protected].