Disinherited beneficiaries may challenge trusts, court says

The state Supreme Court on Thursday reversed an appellate ruling many trust attorneys found shocking, and confirmed probate courts may hear challenges from disinherited beneficiaries who allege they were removed from testamentary instruments as the result of foul play or incompetence.

Authoring the opinion for a unanimous court Justice Ming Chin reasoned that probate courts, which hear disputes over wills and trusts and administer their provisions, have broad and flexible authority to judge challenges brought by heirs written out of such documents.

"The Probate Code was intended to broaden the jurisdiction of the probate court so as to give that court jurisdiction over practically all controversies which might arise between the trustees and those claiming to be beneficiaries under the trust," Chin's opinion reads. Barefoot v. Jennings, 2020 DJDAR 490.

The decision allows Joan Barefoot's probate case to proceed, in which she alleges amendments to a family trust that came late in her mother's life and removed Barefoot as a beneficiary and the successor trustee of the instrument were invalid. Barefoot argues her mother either lacked the legal capacity to render the amendments or was fraudulently induced or unduly influenced to alter the trust by another family member.

More broadly, the ruling clarifies a point of law that many probate practitioners hadn't thought was in any doubt prior to the lowers courts' rulings in this challenge. Both the Tuolumne County Superior Court and 5th District Court of Appeal found Barefoot lacked standing to bring her claims in probate court because she technically was no longer a beneficiary of the family trust. Section 17200 of the Probate Code, under which Barefoot sued, specifically lists trustees and beneficiaries as proper petitioners in disputes over "internal affairs" of trusts, but doesn't reference disinherited beneficiaries.

"In the trust litigation world most practitioners thought the court of appeal decision was shocking, frankly, so most people will be very pleased with the court's decision that, yes, folks disinherited can challenge amendments in probate court," said Robert N. Sacks, partner with Sacks Glazier Franklin & Lodise LLP, a veteran probate practitioner.

Denise E. Chambliss, shareholder and chair of trust and estate litigation at Hoge Fenton Jones & Appel, agreed that prior to the 5th District's decision in 2017 most attorneys assumed disinherited beneficiaries could properly bring attacks to trust amendments before a probate judge.

"I never saw a case where a beneficiary who was disinherited was attacked for lack of standing. Nobody ever raised it, or at least it never went to the level of being a published opinion," Chambliss said. "It was a shock to everybody."

The appellate ruling took an overly technical approach to the statute in question, Thursday's opinion reasoned, and discounted the fact that though Barefoot was no longer a trust beneficiary when her suit was filed, she would again become one were it to prevail.

That potential, Chin concluded, gave Barefoot standing to pursue her challenge. The clarified standard also precludes trust challenges from parties with dubious claims, the court noted, in response to arguments from the case's defendants that the court would invite "chaos" by siding with Barefoot.

"Our holding does not allow individuals with no interest in a trust to bring a claim against the trust," Chin wrote. "Instead, we permit those whose well-pleaded allegations show that they have an interest in a trust -- because the amendments purporting to disinherit them are invalid -- to petition the probate court."

Herbert A. Stroh, of McCormick Barstow LLP, who argued in support of the plaintiff on behalf of the California Lawyers Association, said Thursday greater chaos would have resulted had the appellate ruling stood, as disinherited beneficiaries would've needed to pursue simultaneous claims for undue influence or fraud in civil court while the trusts those suits challenge were administered elsewhere.

Sacks added that probate judges are the best arbiters for torts over testamentary instruments, as they hear such challenges frequently.

"The decision brings really needed clarity as to which court is supposed to handle these contests," he said.

Nathan D. Pastor, a sole practitioner in Walnut Creek who represented Barefoot, called the court's opinion "common sense," and added that its brevity -- at just over eight pages -- signaled the certainty with which the court believed his client should be entitled to proceed with her action in probate court.

Arnold & Porter Kaye Scholer LLP partner Sean M. SeLegue, who argued the case for the defense, said the pithy ruling suggested a limited holding that only welcomes disinherited beneficiaries to challenge isolated provisions in probate court rather than entire trusts.

"We were gratified that the court decided the case on a narrow ground," SeLegue said. "The court did not reach, and left for another day, the question of whether an entire or restated trust may be challenged under Section 17200."

Another question for future consideration, Chambliss said, is whether heirs who were never deemed beneficiaries in trust documents may bring probate challenges under Section 17200. In a footnote the court expressly reserved opinion on that issue.

"If there's any area here to be further explored it's that one," Chambliss said.