What happens if you set up a trust as part of your estate planning, and then change your mind? Can a seemingly minor wording error stop you from amending your trust?

That was the issue that had to be decided by the California Court of Appeal (Cundall v. Mitchell-Clyde.)

John Martin and Robert Cundall met as neighbors in West Hollywood in 2007. Martin moved into an apartment owned by Cundall, while Cundall renovated Martin’s home. (The project, originally budgeted at $81,000, ended up costing $219,000.)

While the remodeling project was underway, Martin engaged attorney Frances Diaz, another neighbor, to manage his finances and prepare an estate plan. Diaz drafted a trust in February of 2009, which Martin signed. It named Cullen as the sole beneficiary and successor trustee.

A clause in the document stated that Martin could revoke or amend the trust at any time “by delivering to the Trustee and the Successor Trustee an appropriate written revocation or amendment, signed by the Grantor and his attorney, Frances L. Diaz.”

A few months later Martin changed his mind. He hired his former bookkeeper to handle his finances, and consulted a new estate planning attorney, Paul Kanin.

According to trial court documents, Martin told Kanin “he thought Cundall and Diaz had stolen from him,” and instructed Kanin not to speak with Diaz.

Kanin, who thought Marin “was lucid and rational,” prepared a new estate plan, including a trust that Martin signed in May of the same year.

Martin informed Diaz that he had retained a new estate planning attorney. Diaz responded by email that she believed Martin was not in his right mind. Diaz also spoke with Martin’s longtime doctor, who told her he thought Martin was fine.

In addition to the May trust, Kanin prepared a revocation of the February trust which only Martin signed. The May trust named Vanessa Mitchell-Clyde and another friend as beneficiaries, with one of them to serve as successor trustee.

Diaz and Cundall attempted to have Martin psychiatrically evaluated, and Cundall evicted Martin from his apartment.

Martin died in January of 2010. In September of that year Cundall sought a ruling from the Los Angeles Superior Court that the February trust had not been validly revoked and that all the trust’s assets should pass to him.

Mitchell-Clyde and the other beneficiary of the May trust objected. They asked the court to rule that the February trust had been properly revoked, and that the May trust was valid and enforceable.

Cundall argued that Martin included the provision requiring Diaz’s signature to revoke the February Trust so Diaz would serve as a “trust protector,” to prevent Martin from making “improvident changes” to his estate plan.

His attorneys pointed out that California law specifies two ways a trust can be revoked. One is by a writing signed by the settlor of the trust or other person holding the power of revocation. The other is by “compliance with any method of revocation provided in the trust instrument.”

Cundall’s attorneys argued that the clause in the February trust requiring Diaz's signature on any trust revocation was the exclusive method available to Martin to revoke the February trust. Since Diaz did not sign the trust revocation prepared by Kanin, they told the court, the February trust was still effective.

The case was litigated in a 23-day trial which, with continuances and scheduling issues, took two years to complete.

The trial court found that Martin’s revocation complied with California law.

The trial court reasoned that because the February trust did not explicitly state that the approval of a trust protector was required for the trust to be revoked, that procedure was not the exclusive means by which Martin was able to revoke the February trust..

Cullen appealed, but the appellate court agreed with the trial court. California law allows a trustee to revoke a trust by a method set forth in a trust or as provided by statute, unless the trust explicitly states that the revocation method set forth in the trust is the is the exclusive method available to the settlor to revoke a trust.

This protects “the clear intention of the settlor who attempts to revoke a revocable trust…in circumstances that do not involve undue influence or a lack of capacity.”

The appellate court affirmed the trial court’s ruling and awarded Clyde her costs on appeal.

By Stefan O'Grady