Trust Revocation In California and Naming of New Trust Beneficiaries

Most trusts are revocable, and it is not uncommon for those who establish a trust (known as settlors) to revoke that trust and replace it with another, naming different beneficiaries.

That is what happened in a trust revocation case in CA that became the subject of an appellate court opinion published in July 2020.

Cundall v Mitchell-Clyde: Trust Revocation

The facts of Cundall v. Mitchell-Clyde start off unremarkably. John Martin lives in West Hollywood, where he owns real estate. In 2007, he becomes friends with his neighbors, Robert Cundall and Frances Diaz. In February 2009, after Cundall and Diaz become concerned about the condition of Martin’s property, Martin agrees to allow Diaz, a lawyer, to draft a new estate plan for him. This estate plan involves a trust with Diaz as the trustee and Cundall as the sole beneficiary. This is the February Trust.

The three begin to work on a real estate renovation together, and Cundall moves into one of Martin’s rental units. The renovation starts to go over budget, as residential remodels often do. The trio have a falling out, and Martin hires another estate planning lawyer to replace the February Trust with one naming Vanessa Mitchell-Clyde, a friend of Martin’s since the 1950’s, as the beneficiary and Ronald Preissman, who reached settlement before trial, as the successor trustee. This is the May Trust.

Given that Diaz, Cundall, and Martin didn’t know each other all that long and that Martin revoked his trust only three months after its creation, you might think that nothing much could happen here. But you would be wrong. When Martin died the following year, a decade-long drama began over the propriety of the February Trust’s revocation and replacement. Diaz and Cundall challenged the revocation on multiple grounds, including that Martin lacked capacity and was under undue influence when he revoked the February Trust.   

Diaz and Cundall also challenged the manner in which Martin’s new lawyer decided to revoke the February Trust. The initial trust provided that it could be revoked in a specified way, but the lawyer who drafted the May Trust instead followed the process set forth in section 15401 of the Probate Code. Diaz argued that the trust revocation was invalid for failure to follow the process described in the original trust document.

In 2018, following a twenty-three-day trial that spanned over two years, the Superior Court of L.A. County ruled in favor of Mitchell-Clyde as the beneficiary. The trial judge concluded that Martin had capacity to revoke the February Trust, was not under undue influence, and was permitted to use the method of trust revocation specified in section 15401. The judge also found that some of Diaz’s testimony regarding Martin’s intent in drafting the May Trust was not credible, something courts don’t often go on the record to say.

Faced with what looked like a complete loss at trial, you might think that would be the end of things. But again, you would be wrong. Cundall hired new representation and filed an appeal. The appeal argued that the trial judge erred in concluding the method of revocation was proper. The parties fully briefed the matter and settled the case just before oral argument. Nonetheless, the appellate court decided not only to render a decision, but to publish it.

The appellate court’s conclusion is clear – the trial judge was correct. Without language making a trust’s revocation procedure exclusive, the statutory method is valid. Thus, the manner in which Martin’s lawyer chose to revoke the February Trust was proper. The court published the opinion to provide guidance to others regarding the rules governing the revocation of trusts. On appeal, the court also ordered Cundall to pay Mitchell-Clyde’s costs and attorney’s fees. This appellate court opinion, which came ten years after the settlor’s death, provides clarity that might spare others from enduring such a long saga.

While the legal standard for trust revocation has been clarified, why Diaz and Cundall persisted in this case for a decade remains a mystery. The trial judge indicated that the “vehemence” of Diaz and Cundall’s reaction to being replaced as the lawyer and beneficiary “was a concern” but was not motivated by an improper purpose to do Martin harm. The appellate opinion is curiously silent about how much money was at stake in Martin’s estate, but that amount may have played a role in Cundall’s persistence. 

The Complexity of Emotions in California Estate Planning Cases

Beyond the legal aspects, estate planning often carries deep emotions for the people involved. With issues of family, death, status, and money at play, any action taken in estate planning should factor in the complex reactions that may follow.