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Words Have Meaning – Revocation of Trusts after Cundall

New California Case Law: a trust may be revoked by following the default California statutory revocation procedure, unless the trust includes a revocation procedure that is explicitly identified as the “exclusive” revocation procedure; no implicit assumption of exclusivity is created merely by the inclusion of a specific revocation procedure.

California statutes include a default procedure for revoking a trust: the settlor must sign a revocation and deliver it to the trustee.  However, many trusts include provisions detailing stricter revocation procedures.  Whether these provisions are boilerplate included by a drafting attorney or insertions based on a settlor’s specific desires, they raise the question of which revocation procedure should control.  The appellate court recently answered this question in Cundall v. Mitchell-Clyde (2020) ___ Cal.App.5th ___ (“Cundall”).  The short answer is that in order for a specific trust revocation provision to control, it must specify that it is the “exclusive” method for revoking the trust.

In Cundall, the settlor of a trust included a specific revocation procedure in the trust document.  Among other requirements, the procedure required both the settlor and his attorney to sign the revocation.  A few months after the trust was executed, the settlor and his attorney had a falling out, and the settlor decided to execute an entirely new trust.  The settlor signed a revocation of the old trust and delivered the signed revocation to himself as trustee.   However, his former attorney did not sign the revocation.  Thus, the attempted revocation did not comply with the requirements of the revocation procedure outlined in the trust document.  However, it did satisfy California’s default revocation procedure as stated in Probate Code section 15401, subdivision (a)(2), which only requires that the settlor sign a revocation and deliver it to the trustee.

A year later, upon the settlor’s death, beneficiaries under both trusts filed competing petitions for instructions, seeking the court’s guidance on whether the revocation of the first trust was valid.  The litigation dragged on interminably; the trial alone took twenty-three days spread out over a period of two years.  Consider that a reminder to have a qualified California estate planning attorney draft your Will or trust; the investment in your future is well worth it.

Robert Cundall, the sole beneficiary of the first trust, argued that that the trust’s specific revocation procedure should be considered exclusive by default, and in the alternative, that the statutory revocation procedure applied only to the “method” of revocation rather than the “authority” to revoke.  He argued that the settlor’s attorney was the only party with the authority to revoke the trust, because the first trust contained a provision designating the settlor’s attorney as a “trust protector.”

The trial court dismissed both of Robert’s arguments, holding that the first trust was properly revoked.  In resolving the dispute between the application of the two revocation clauses, the court looked first to the specific wording used in the statute: “If the trust instrument explicitly makes the method of revocation provided in the trust instrument the exclusive method of revocation, the trust may not be revoked pursuant to this paragraph.”  (Probate Code, section 15401, subdivision (a)(2).)

The issue in interpreting section 15401(a)(2) is whether a revocation procedure included in a trust document is “exclusive” or not.  In answering this question, the court in Cundall relied on a 2008 decision in Masry v. Masry (2008) 166 Cal.App.4th 738 (“Masry”).  The court in Masry confirmed the plain language reading of the statute, holding that the mere inclusion of a revocation procedure in a trust document – which does create an implicit assumption of exclusivity – does not satisfy the wording of the statute, which specifically requires an explicit statement of exclusivity in order to prevent the use of the less-strict default statutory revocation procedure.

The court also dismissed Robert’s argument that the default revocation procedure should not control over a specific party’s authority to revoke.  Robert pointed to the fact that the first trust designated the settlor’s attorney as the “trust protector,” arguing that the court should recognize a distinction between the “method” of revocation and the “authority” to revoke.  The court disagreed, holding that the theoretical distinction makes no difference, and pointing to the fact that there is no exception in the statutory revocation procedure for trust documents that designate persons who must approve revocation.  Essentially, where the trust fails to make a specific revocation procedure exclusive, the default statutory revocation procedure is available to the settlor.  The complexity or specifics of the procedure specified in the trust document have no impact on the applicability of the default revocation procedure.  Everything hangs on the presence or absence of an explicit statement of exclusivity.

The key takeaway from Cundall is the importance of explicitly making a revocation clause exclusive, if you want that provision to control instead of the default statutory procedure.  However, the larger picture here is one that highlights the importance of having a competent attorney draft your estate planning documents.  In Cundall, years of litigation and likely hundreds of thousands of dollars of attorney’s fees could have been avoided by proper trust drafting.  If you are ready to make an estate plan, we are here to help.  Our Sacramento, California estate planning attorneys can walk you through the process of safeguarding your assets, prepare a bulletproof plan for you, and assist you in executing the documents such that you know that every t is crossed and every i is dotted.  Having a strong and legally correct Will and/or trust is key to having life-long peace of mind and preventing the type of extended litigation that occurred in Cundall.  Call our office today at (916) 525-7980 for a free estate planning consultation.  If you are in the midst of disagreement or even litigation regarding a loved-one’s estate or trust, our litigation team can step in to enforce your rights, analyze and get to the heart of the matter, and if needed, take your case all the way to the courtroom.