Opinion
NOT TO BE PUBLISHED
Superior Court County of Ventura, No. P080120, Kent M. Kellegrew, Judge.
Law Offices of RL Francis, Richard L. Francis, for Plaintiff and Appellant.
Benton, Orr, Duval and Buckingham, Thomas Olson for Defendant and Respondent.
COFFEE, J.
In 1999, husband and wife executed a revocable trust, giving their adult children equal shares of their estate. They executed powers of attorney, authorizing one another to withdraw trust assets. Husband became incapacitated. Relying on his power of attorney, wife created another trust in their joint names in 2004, naming son as the sole beneficiary. Daughter was expressly disinherited. Wife withdrew the assets from the 1999 trust and placed them in the 2004 trust. After wife's death, daughter filed an action, claiming that husband's power of attorney was invalid, thus the 2004 trust was without force or effect. We vacate the judgment and remand to the trial court with directions to enter a new and different judgment.
Creation of 1999 Trust
On August 11, 1999, Elmer J. Gunn (husband) and Louise Gunn (wife) executed the Gunn Family Trust. The trust estate consisted of community property (a residence in Oxnard and several bank and brokerage accounts) and wife's separate property (a money market fund). Husband had no separate property. At the survivor's death, the community property was to be distributed equally to the grantors' adult children, appellant Sandra K. Hill and respondent Gary Lee Gunn. Wife's separate property was to be distributed to Gary.
Husband and wife appointed Gary to serve as successor trustee of the 1999 trust, with Sandra as an alternate. Husband appointed wife to serve as his conservator, should he become incapacitated. Gary was named as an alternate conservator. (1999 trust, ¶¶ 3.013)
We refer to the parties by first name for the purpose of clarity.
Under the 1999 trust, both grantors had the power during their joint lifetimes to revoke, alter or amend the trust as to the community property. (1999 trust, ¶¶ 2.01 & 2.02.) The trust also gave this power to the person appointed under the grantor's durable power of attorney, as long as that power was expressly stated in the power of attorney. (1999 trust, ¶ 2.03.)
Paragraph 2.03 of the 1999 trust provides that "[t]he power to revoke, alter or amend this instrument shall be exercisable by the Grantor, or by the appointed person under the Grantor's Durable Power of Attorney if the power is expressly stated in the Durable Power of Attorney, or as authorized by the court through a court appointed guardian or conservator."
At the same time, husband and wife executed durable powers of attorney for business affairs and health care. Each appointed the other to serve as an attorney-in-fact. Gary was named as an alternate and Sandra was to serve if Gary could not. Husband's power of attorney permitted wife to withdraw assets from a revocable living trust, create and execute a trust and amend trust language. It did not authorize her to revoke the trust. The power of attorney also required that the beneficiary designations remain the same or, if amended, required the written permission of the beneficiaries. (Power of Attorney, ¶¶ H & I.)
Under husband's power of attorney, wife was authorized "[t]o distribute, make gifts and/or withdraw assets from my Revocable Living Trust for my benefit or the benefit of my spouse. This power and authority is hereby given with my full prior consent to this exercise of my reserved power to withdraw assets from the Trust. If my spouse is my Attorney-in-Fact, then I authorize withdrawals from the Trust for my spouse's benefit alone, and not for my benefit, without breach of fiduciary duty and with my full prior consent provided that the QTIP and/or other beneficiary designations remain the same or are amended with the permission of such beneficiaries in writing and properly notarized." (Power of Attorney, ¶ H, italics added.)
The estate planning documents were prepared by an organization identified as "Legacy Prepaid Legal Plan." A representative from Legacy Prepaid Legal Plan came to the home of husband and wife to execute the documents. Sandra testified that the individual was a notary, but said she did not know if he was an attorney. Gary was present for part of the time and testified that the representative explained each document to his parents. He did not know whether the individual was an attorney.
In March 2003, husband was declared incompetent and Gary was appointed to serve as the conservator of his person. No conservatorship was established for his estate. In June 2003, Sandra was prosecuted after she physically attacked her mother. She entered a plea of no contest to misdemeanor elder abuse (Pen. Code, § 368, subd. (a)), was placed on probation and ordered to pay a $1,691 fine.
Creation of 2004 Trust
On January 14, 2004, wife executed the Elmer J. Gunn and Louise E. Gunn Revocable Trust. She signed it in her individual capacity and on behalf of husband as his attorney-in-fact. Gary was appointed as successor trustee and Sandra was expressly prohibited from serving as a trustee.
The 2004 trust provided that, at wife's death, the estate would be distributed outright to Gary. Sandra was to take nothing and was given a cash gift of $1. Wife transferred the assets from the 1999 trust into the 2004 trust. On March 12, 2004, wife revoked the powers of attorney for herself and husband, in which they had named Sandra as an alternate agent. Husband died on February 8, 2005, and wife died on June 16, 2006. At her death, the community property consisted of a residence at 1155 W. Juniper Street in Ventura.
The schedule of assets attached to the 1999 trust indicated that this property was located in Oxnard.
The 2004 trust was drafted by attorney Vicki Fullington who later testified that wife wished to prevent Sandra from being named as a beneficiary or serving as a trustee or as an agent under a power of attorney.
Challenge to Validity of 2004 Trust
Sandra filed a petition to set aside the 2004 trust and requested an accounting. She argued that wife was without authority to revoke or amend the 1999 trust, thus the 2004 trust was without force or effect.
In his trial brief, Gary contended that Sandra was not entitled to relief because she had no beneficial interest in the trust estate, nor did he breach any fiduciary duty owed to her. Gary asserted that wife had authority to transfer assets from the 1999 trust pursuant to husband's power of attorney.
Gary argued that wife did not revoke or amend the 1999 trust, but only withdrew its assets. He asserted that wife chose to disinherit Sandra after Sandra assaulted her and contended wife acted within her authority as husband's attorney-in-fact in executing the 2004 trust. The trial court ruled in favor of Gary.
In its statement of decision, the court indicated that, under established authority, wife was barred from changing husband's designation of beneficiaries. However, in addition to examining the testamentary documents, the court stated it had considered the circumstances surrounding wife's actions. It noted that Gary was the preferred successor trustee and conservator and had been the sole beneficiary of wife's separate property. It took judicial notice of the court file in husband's conservatorship proceeding, which allegedly included the declarations of wife and husband's care assistant concerning Sandra's assault on wife. The court concluded its statement of decision with this statement, "Mr. Gunn would have approved the 2004 Trust, effectively eliminating Ms. Hill, after the elder abuse incident."
DISCUSSION
Our task on appeal is to determine the scope of wife's authority under the power of attorney. We also consider Sandra's contention that the document itself was defective because it did not include certain statutory warnings concerning the scope of an agent's power. The parties agree that these are legal questions subject to our independent review. (In re Estate of Herold (2008) 162 Cal.App.4th 983, 990; Estate of Norris (1947) 78 Cal.App.2d 152, 159.)
A trust may not be modified or revoked by an attorney-in-fact under a power of attorney unless expressly permitted by the trust instrument. (Prob. Code, § 15401, subd. (c).) Section 4264 provides that an attorney-in-fact may not create, modify or revoke a trust or change the designation of beneficiaries unless those acts are expressly authorized in the power of attorney. (Id. at subds. (a) & (f); Schubert v. Reynolds (2002) 95 Cal.App.4th 100, 104, 106.)
All statutory references are to the Probate Code unless otherwise stated.
Section 4264 provides in part, "A power of attorney may not be construed to grant authority to an attorney-in-fact to perform any of the following acts unless expressly authorized in the power of attorney: [¶] (a) Create, modify or revoke a trust. [¶] . . . [¶] (c) Make or revoke a gift of the principal's property in trust or otherwise. [¶] . . . [¶] (f) Designate or change the designation of beneficiaries to receive any property . . . on the principal's death . . . ."
Sandra does not argue that wife revoked the 1999 trust. Rather, she claims wife was not authorized to "'defund'" the 1999 trust. Her primary contention is that the document upon which wife relied to execute the 2004 trust — husband's power of attorney — is defective, thus the 2004 trust is of no effect. Sandra's specific claim is that the power of attorney did not comply with the statutory requirements of section 4128, which require that the document contain certain warnings.
Section 4128 provides in part, at subdivision (a), that "[a] printed form of a durable power of attorney that is sold or otherwise distributed in this state for use by a person who does not have the advice of legal counsel shall contain, in not less than 10-point boldface type or a reasonable equivalent thereof," statutory warnings that describe in detail the consequences of executing a power of attorney.
It is undisputed that husband's power of attorney did not contain the admonitions specified in section 4128. However, those warnings were not required. The power of attorney was not an all purpose pre-printed form requiring the parties to "fill in the blanks." It was prepaid by Legacy Prepaid Legal Plan and drafted specifically for husband and wife. The document is three pages long and bears in the printed text the names of husband, wife, Gary and Sandra and makes reference to the Gunn Family Trust. The only blank spaces that required handwritten information were the date the trust was executed and the names, signatures and addresses of the two subscribing witnesses.
Sandra argues that Gary bore the burden of proving that the power of attorney was valid. She claims he was required to prove that husband and wife were given legal advice in the preparation of the 1999 trust. His failure to do so, Sandra contends, means that the document was an "all purpose" form requiring the statutory warnings pursuant to section 4128. We disagree. The moving party bears the burden of proof. (Wright v. Fireman's Fund Ins. Companies (1992) 11 Cal.App.4th 998, 1014.) Thus, Sandra has not shown that the power of attorney was defective. Nor has she demonstrated that her parents lacked legal advice in the preparation of their estate planning documents.
Sandra next contends that wife's act of removing the assets from the trust was effectively a change of beneficiary designation, thus the 1999 trust must fail. As we have explained above, wife was authorized to withdraw community property assets from the 1999 trust during husband's lifetime. Under husband's power of attorney, wife was permitted to withdraw trust assets "for [wife's] benefit alone, and not for [husband's] benefit, without breach of fiduciary duty and with [husband's] full prior consent provided that the . . . beneficiary designations remain the same or are amended with the permission of such beneficiaries in writing and properly notarized." (Power of Attorney, ¶ H.)
Wife withdrew the community property assets from a revocable trust during husband's lifetime. This was authorized under both the 1999 trust and husband's power of attorney. She created a new trust, which was also authorized under both documents. Wife had the authority to name Gary as the sole beneficiary of her share of the community property. However, under section 4264, subdivision (f), she was barred from changing husband's beneficiary designation as to his share of community property. We conclude only that portion of the 2004 trust constituting a change in beneficiary designation is invalidated. Thus, husband's equal distribution to Sandra and Gary has not been affected by the creation of the 2004 trust. Sandra is entitled to one-half of husband's community property interest.
Judicial Notice of Conservatorship File
Sandra argues that the trial court erred in taking judicial notice of the conservatorship file and the declarations within the file. We agree. The trial court referred to the conservatorship file in its statement of decision and speculated as to husband's wishes. Before a court may take judicial notice of information not received in open court, the court "shall afford each party reasonable opportunity to meet such information . . . ." (Evid. Code, § 455, subd. (b).) The only issue before the court was the validity of husband's power of attorney and the scope of wife's authority under that document.
Discovery
Sandra moved to compel discovery of documents pertaining to the transfer of assets and creation of the 2004 trust. A motion to compel was set for the same date as the trial. It was stipulated that, should the court find the 2004 trust valid and the transfers proper, there would be no right to discovery. Sandra argues on appeal that she should be permitted to engage in discovery. We cannot consider her contention. She did not obtain a ruling on her motion, thus there is no decision to review.
DISPOSITION
We vacate the judgment and remand the matter to the trial court with directions to enter a new judgment 1) establishing the validity of the 2004 trust, and 2) invalidating wife's attempt to change husband's beneficiary designation. Accordingly, appellant shall take one-half of husband's community property (25% of the community estate). Respondent shall take all of wife's community property and one-half of husband's community property (75% of the community estate).
Costs on appeal are awarded to appellant.
We concur: GILBERT, P.J., PERREN, J.
Wife was also given authority "[t]o create and execute a Revocable Living Trust, amend the language of my Revocable Living Trust for my benefit or the benefit of my spouse, and/or QTIP and/or other beneficiaries (otherwise to be amended with written consent and properly notarized) with my full prior consent to this exercise of my reserved power to change the language of the Revocable Living Trust, and, if my spouse is my Attorney-in-Fact, then I authorize language amendments from the trust for my spouse's benefit alone, and not for my benefit, without breach of fiduciary duty, and with my full prior consent provided that the QTIP and/or other beneficiary designations remain the same or are amended with the permission of such beneficiaries in writing and properly notarized." (Power of Attorney, ¶ I, italics added.)