Contested Trusts

The case of Andersen v. Hunt (2011) 196 Cal.App.4th 722, helps clarify what used to be limited and inconsistent California precedent regarding the capacity standard necessary to execute a trust or trust amendment. Capacity is a common theme of trust litigation as our population ages, particlaurily when there are trust amendment late in life altering historical plans after the death of a spouse. In determining the appropriate capacity standard to evaluate trust amendments Andersen concluded:

"[w]hen determining whether a trustor had capacity to execute a trust amendment that, in its content and complexity, closely resembles a will or codicil, we believe it is appropriate to look to section 6100.5 to determine when a person's mental deficits are sufficient to allow a court to conclude that the person lacks the ability to ‘understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.’ In other words, while section 6100.5 is not directly applicable to determine competency to make or amend a trust, it is made applicable through section 811 to trusts or trust amendments that are analogous to wills or codicils." (Emphasis added.) Conversely, as to trusts or trust amendments that, "in content and complexity" do not "closely resemble a will or codicil," Section 812 is applicable (id. at p. 730.). Consequently, the more complicated the trust or trust amendment the greater the mental capacity required for the settlor to execute the instrument.

Applying this distinction to determine the standard applicable to the instruments at issue, Andersen held that "[i]n view of the amendments’ simplicity and testamentary nature, we conclude that they are indistinguishable from a will or codicil and, thus, [decedent’s] capacity to execute the amendments should have been evaluated pursuant to the standard of testamentary capacity articulated in section 6100.5." (Id. at p. 731).

As a result of the Andersen opinion, whether the capacity standard under Section 812 or the capacity standard under Section 6100.5 is applicable to a trust or trust amendment will now vary from case to case. Specifically, courts are compelled to decide whether the instrument is simple and "indistinguishable from a will or codicil" before ruling on the applicable capacity standard. In addition, when Section 812 applies the degree of capacity will depend on the complexity of the particular instrument in question. This will create a patchwork of decisions focusing on the peculiar facts of each case, leaving drafters and litigators alike to speculate on the capacity standard a court might apply to any given instrument.

Andersen also raises concerns regarding the application of the contractual capacity standard to nonprobate at-death transfer instruments, which can lead to incongruous results. Although the Andersen court upheld the decedent’s trust amendments, it invalidated his insurance policy and joint tenancy account designations even though beneficiary designations, like wills and revocable trusts, are testamentary in nature. For consistency, a person's capacity to make a beneficiary designation -- which is generally easier to understand than a will or simple trust amendment --should be the same as that required to make or amend a will or trust.

The standard for testamentary capacity is exceptionally low. Probate Code section 6100.5, lists criteria stating an individual is not mentally competent to make a will if unable to understand the nature of the testamentary act, understand and recollect the nature of his or her assets, or remember and understand his or her relationship to family members, friends, and those whose interests are affected by the will. (Probate Code, § 6100.5, subd. (a)(1).)  In addition, an individual lacks mental competence if he or she suffers from a mental disorder with symptoms such as delusions or hallucinations that cause him or her to devise property in a way the individual "would not have done." (Probate Code, § 6100.5, subd. (a)(2).) Interestingly, this seemingly clearly written statutory authority has been interpreted by the courts to create a very low standard for testamentary capacity.  It is well settled, "old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize old friends or relatives, physical disability, absent-mindedness and mental confusion do not furnish grounds for holding that a testator lacked testamentary capacity." (Estate of Selb, supra, 84 Cal.App.2d at p. 49.)     

Indeed, even hallucinations and delusions do not demonstrate lack of capacity if they are not related to the testamentary act. (Estate of Perkins (1925) 195 Cal. 699, 704; see also Estate of Fritschi (1963) 60 Cal.2d 367, 372 [testator in hospital with fatal cancer, physically weak, disturbed and under heavy dosage of drugs possessed testamentary capacity].) And like marital capacity, the mere fact the testator is under a conservatorship will not support a finding of lack of testamentary capacity without additional evidence of mental incompetence for making a will. (Probate Code, § 1871, subd. (c).)

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