If you go to court seeking to have the terms of a trust enforced, you’d better understand what the trust really says.

That was the lesson six siblings learned when they asked the California Court of Appeal to settle their dispute about provisions of their parents’ trust (Trolan v. Trolan (2019) 31 Cal.App.5th 939).

Santa Cruz County residents Howard and Alice Trolan created the trust in 1974, when their six children were minors. Howard died some years later, leaving Alice as the sole surviving settlor trustee. In 2003 she amended the trust, naming the six children as successor co-trustees, with the power to act by majority vote.

Alice died in 2015, whereupon the trust became irrevocable and the siblings became the trustees.

Upon Alice’s death, the trust was to be apportioned “into equal shares for each” of the six siblings. The trust didn’t require the shares to be physically segregated or divided unless that was “required by the termination of” the trust.

Each of the siblings was to get half of the principal set aside for him or her when they reached age 25, the trust said, and receive the balance at age 30.

The estate consisted primarily of several parcels of real estate, and shares of stock in a bank.

The trustees were authorized to “continue to hold any property received in trust,” and to “partition, allot and distribute the Trust Estate.”

After Alice’s death, Nellie Trolan asked to receive her one-sixth share of the estate in cash. (By this time, all six siblings were older than 30.) The other five all wanted to hold onto the real estate, and agreed to give Nellie her share in cash, based on the fair market value of the real estate. The six retained a probate referee to appraise the value of the properties.

When the five siblings saw the referee’s valuation, they decided it was too high, and obtained another appraisal which valued the parcels at much less. They then went to court, asking for a ruling on the value of the entire estate and of Nellie’s share, so they could pay her and continue to operate the trust for the benefit of the other five siblings.

Nellie argued that, since all the siblings were over 30, the trust assets should be sold, the proceeds of the sale equally distributed between the beneficiaries, and the trust terminated.  

Nellie’s siblings, on the other hand, argued that they had the right to retain property in the trust regardless of the fact that all of the settlors’ children were over the age of thirty, and to decide its value as the majority trustees.

The trial judge found no need to proceed with an evidentiary hearing, however, finding that the  distributive provisions requiring the trustee to distribute to a beneficiary his/her balance of the trust at age 30, was “unambiguous” and “controlling.”

The five siblings appealed, arguing that the trust was ambiguous, and that settlors did not intend that the trust terminate upon all beneficiaries reaching the age of 30.  The Appellate court disagreed, and affirmed the trial court’s decision.

According to the Appellate Court, “[i]f the language of the instrument clearly sets forth the intent, the court does not consider extrinsic evidence.” Rather, “[if] the court can ascertain the testator’s intent from the words actually used in the instrument, the inquiry ends.” 

Courts will always construe trusts according to the ordinary meaning of the language used.  Read the trust carefully; don’t argue for an ambiguity where there is none.

By Stefan O’Grady