Are you or someone you know a beneficiary or potential beneficiary of a trust or estate that has litigation pending? If so, a recent case from the Court of Appeal of the State of California, Second Appellate District, Division Six may be of interest to you. In the case of Breslin v. Breslin, B301382 (2021), the court held that potential beneficiaries who failed to respond to the petition of the trustee of a decedent’s trust to determine the beneficiaries of that trust and failed to participate in a court ordered mediation were barred from objecting to a settlement agreement that eliminated them as beneficiaries.
In the case of Breslin, the page that listed the residual beneficiaries of the Trust was missing and no one knew the actual residual beneficiaries of the Trust. Although the remaining pages of the Trust indicated that the residual beneficiaries were to be charities, the actual names of the charities were unknown. The trustee was able to find a list of charities, in the decedent’s estate plan binder, and submitted that list with his petition and gave notice of the petition to all of the charities on that list in addition to the heirs of the deceased trustor. Only three of the noticed charities filed a written response to the petition.
Pursuant to California Probate Code Section 17206, the probate court ordered all interested parties to participate in mediation, including the heirs of the decedent and the 24 charities. A notice of the mediation was sent to all of the interested parties. The heirs of the decedent and five of the listed charities participated in the mediation and reached a settlement that included the heirs and the five participating charities, but not the other 19 charities.
The trustee sought court confirmation of the settlement with another petition. Like the original petition, all 24 charities were noticed of the petition and the settlement reached at mediation. One of the 19 excluded charities, that had not responded to the original petition or participated in the mediation objected to the settlement. The court denied the objections of the charity and approved the settlement agreement. The charity appealed.
The Appellate Court determined that the charity had failed to participate in a court ordered mediation, of which they were properly noticed, and as such had lost their right to object to the terms of a settlement agreement that excluded them.
The Breslin case was a bit unique because the actual names of the beneficiaries were unknown. However, there are many trust and will contests filed each year that seek a court determination as to the validity of estate planning documents. Although those contested documents may actually name beneficiaries, the relief being sought ultimately requires a determination, through settlement or a trial, as to who the beneficiaries are and their interests, like Breslin.
A Wait and See Approach Could Cost You
I have been litigating these types of cases for nearly 15 years and know firsthand that there are often individuals or entities that opt not to get involved in the litigation and “observe from the sidelines.” They may not want to get involved to avoid attorney fees; maybe they do not believe the dispute really involves or affects them; or like the charity in this case, maybe they believe that another party’s response seeking an order aligned with their interest, sufficiently states their case. Whatever the reason, the Breslin case should be a cautionary tale for anyone thinking of being a spectator to the proceedings. No other party has an obligation to assert your rights in the court proceedings or at mediation, even if your interests seem aligned. If the parties are ordered to mediation, you must participate or forever hold your peace if you are dissatisfied with the results.
Anyone considering avoiding the cost of filing a response or formally joining in the proceedings and waiting to see what happens after the first hearing should also know that settlements are not always reached by way of a noticed and formal mediation. The very first case I ever settled was settled at the initial hearing when the Judge offered the parties an opportunity to have a settlement conference that day. My client was contesting the validity of a trust that was amended to name only one beneficiary, excluding several individuals named in an earlier version of the trust. Although they were all provided notice of my client’s petition, none of the other excluded beneficiaries responded or attended the initial hearing. Since my client was seeking a ruling to invalidate the newer trust, it may be that the excluded beneficiaries felt they were safe in observing the litigation that if successful would allow them to reap the benefits of having the old trust reinstated without having to get involved or incur attorney fees. Their mistake was that we were not litigating on their behalf. While our interests were aligned in invalidating the newer trust, we were not required to consider their interest in a settlement. When offered a settlement that gave him close to what he would have received under the original trust, but leaving the new trust otherwise intact, my client settled. The Judge approved the settlement that day and dismissed my client’s petition with no additional appearances or court filings. As a result of their absence, the settlement reached did not include the excluded beneficiaries and the matter was resolved with only one court appearance. The excluded beneficiaries were also precluded from filing their own trust contest, because the very short window for them to file such a claim had already closed.
If you have an interest in a trust or estate that is being litigated, do not wait to see what happens as your interest may be reduced or eliminated by your failure to get involved. Neither the trustee or any other beneficiary has an obligation to negotiate or litigate on your behalf when there is a question as to the beneficial rights to the assets of the trust or will.
The Breslin case is also a warning for anyone who has a trust or Will that lists your beneficiaries on an attachment which can be easily detached and lost. While that may seem like an easier way to identify your beneficiaries, it only works if the page remains attached to the trust. Thousands of dollars of attorneys’ fees, court costs and delays could have been avoided if those beneficiaries had been listed in the body of the trust. Also and perhaps more importantly, the decedent’s intention for the distribution of his estate would have been honored rather then left to settlement among 5 of the 24 potential charities he intended to benefit.
Don’t wait until it’s too late. Contact Cannon Legal Firm today. We proudly serve Seal Beach, Long Beach and the surrounding communities for all your Estate Planning, Trust & Estate Litigation, Trust Administration and Probate needs. Contact us for a free consultation or schedule a Zoom or telephone appointment online. Dana@CannonLegalFirm.com – 562.543.4529 (Voice and Text) – www.CannonLegalFirm.com