On January 23, 2020, the California Supreme Court issued a much-anticipated opinion affirming the standing of beneficiaries disinherited by a later trust amendment to challenge that amendment in probate court. The Supreme Court stated unequivocally that “when a plaintiff claims to be a rightful beneficiary of a trust if challenged amendments are deemed invalid, she has standing to petition the probate court under section 17200 [of the Probate Code].”
The Supreme Court’s decision overrules the fifth district appellate decision in Barefoot v. Jennings (2018) 27 Cal.App.5th 1, a case that generated considerable consternation and uncertainty amongst California trust litigators over the past year. The appellate court had reasoned that a person disinherited under the most recent version of a trust does not meet the definition of a “beneficiary” under section 24 of the Probate Code and therefore lacks standing to file a petition for instructions in probate. If upheld, Barefoot may have exiled disinherited beneficiaries from the probate courts, forcing them to seek relief in civil court before judges (and perhaps even juries) with little or no probate experience.
The California Supreme Court rejected such a result on policy grounds. The Supreme Court reasoned that allowing disinherited beneficiaries to bring trust contests under section 17200 “provides an orderly and expeditious mechanism for limited challenges… to be litigated early in the probate process, in probate court, and to ensure that the settlor’s intent is honored.” Such an “orderly” process for petitioning the probate court for instructions as to the validity of a trust should be available to “those whose well-pleaded allegations show that they have an interest in a trust – because the amendments purporting to disinherit them are invalid[.]”
The Court compares the predicament of such disinherited beneficiaries to that of persons facing disinheritance by means of a trust’s “no contest” provision when they bring fraud or undue influence claims under section 21380 of the Probate Code. In such cases, public policy will prevent enforcement of the “no contest” provision allowing for someone to prove that the documents were procured through fraud or that the testator was being unduly influenced at the time of execution. “Similarly, where a person fraudulently induces a settlor to amend a trust so that it transfers all of the settlor’s estate to that person and disinherits all prior beneficiaries, it would undermine the public interest if a court were to rule that those valid beneficiaries had no standing to contest the fraudulently procured amendment.”
Although the Supreme Court’s decision provides much-needed clarity on the standing of disinherited beneficiaries, the Court explicitly declined to decide “whether an heir who was never a trust beneficiary has standing under the Probate Code to challenge that trust.” (emphasis added) That issue will have to wait for another day.