On January 31st, 2019, California’s Sixth District Court of Appeals reversed a lower court’s decision that ordered the liquidation of a family trust.
Santa Rosa, CA -- (ReleaseWire) -- 03/01/2019 -- In the case of Patrick Trolan et al., as trustees vs. Nellie Trolan, the appeals court ruled that although the lower court's decision was correct in requiring the distribution of the assets within the trust, the forced liquidation was inappropriate. The trustees should retain discretion to distribute the trust.
The underlying dispute in this case arose out of Santa Cruz County. In 1974, two parents set up a trust for their six children. In 2015, when the mother passed away, five of the siblings jointly agreed that they wanted to keep their assets within the trust — with the goal of increasing the value for the next generation. However, one dissenting sibling argued that she had the right to request full distribution and that she wanted her share of the trust in cash.
Upon review of the case, a trial court determined that not only did the dissenting sibling have the right to request her share, but also that termination of the trust was necessary. The court went so far as to require the immediate liquidation of the trust along with the payment of all legal fees through the proceeds of the trust.
On appeal, the Sixth Appellate Court reversed the order to liquidate the trust. The appeals court affirmed the decision that the sibling did have the right to receive her share of the trust. Indeed, the appeals court determined that the lower court was correct in requiring the termination of the trust, the reason being that the founding documents unambiguously stated that assets would be distributed on the 30th birthday of each beneficiary. However, the lower court was incorrect in ordering the payment of attorney's fees and ordered liquidation, ruling that the trustees should retain discretion in how exactly the trust would be terminated.
This case is another example of how complex trust litigation can be in California. As noted by Sonoma County estate planning attorney Charles D. Stark, "When setting up a trust, the language always matters. Should a dispute arise over a trust, California courts will carefully examine the language in the controlling documents. To ensure that the true wishes of the founder are carried out, the language must be unambiguous and specific." He further emphasized how important to it is to have holistic conversations with your estate planning attorney to anticipate and plan for family issues such as business succession, sibling rivalries, and control issues.
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