Litigation Alert

• Publication year: 2020
• Author: By Jeremiah J. Moffit, Esq., Catherine M. Swafford, Esq., Matthew R. Owens, Esq., and Courtney A. Sorensen, Esq.

LITIGATION ALERT

By Jeremiah J. Moffit, Esq.,^* Catherine M. Swafford, Esq.,^* Matthew R. Owens, Esq.,^* and Courtney A. Sorensen, Esq.^*

THE COURT MAY NOT REFORM A WILL TO EXERCISE A POWER OF APPOINTMENT

Estate of Eimers v. Eimers (2020) 49 Cal.App.5th 97

The Second District Court of Appeal held a will could not be reformed to add a specific reference to a power of appointment.

The trustors created a trust that provided the trust assets would be divided equally between their children. The trust created a power of appointment over the shares held in trust for the children's benefit. The power of appointment could be exercised "by will specifically referring to and exercising" the power of appointment. The trustors' son wrote a holographic will that provided his "shares of the" trust were to be distributed to the petitioners. After his death, the trustee of the trust petitioned the court for instructions on whether he could distribute the son's share to the petitioners. The trustee took the position that the son had not validly exercised his power of appointment because he failed to refer specifically to the power in his will, as required by the terms of the trust. The court agreed, and the First District Court of Appeal affirmed.

The petitioners then filed a petition to amend or reform the son's holographic will to clarify his intent. The trustee demurred to the petition on the ground that Probate Code section 631, subdivision (b) and section 632 prohibited the reformation. The trial court sustained his demurrer. The petitioners appealed.

The Second District Court of Appeal affirmed the order sustaining the demurrer on the reformation petition. Reforming the will to reference the power of appointment would effectively nullify several Probate Code sections. Probate Code section 630, subdivision (a) provides that if the instrument creating a power of appointment specifies requirements as to the exercise of that power, the power can be exercised only by complying with those requirements. Probate Code section 632 provides that if the creating instrument requires a specific reference to the power or to the instrument creating the power, "the power can be exercised only by an instrument containing the required reference." Probate Code section 631, which addresses when a court can and cannot excuse compliance with the terms of a power of appointment, specifically states that a court may not excuse compliance with a "specific reference requirement under Probate Code section 632." Here, although the son clearly intended to exercise the power of appointment and the intention of a testator normally controls, the trust required a specific reference to the power of appointment. The son's reference to his "shares of the" trust did not constitute such a specific reference, an omission that could not be cured by reformation. Reforming the holographic will to effectively exercise the power of appointment would eviscerate Probate Code section 630, subdivision (a) and section 632, and is expressly prohibited by Probate Code section 631, subdivision (b). Finally, the Court of Appeal distinguished Estate of O'Connor (2018) 26 Cal.App.5th 871, in which the attempted exercise of appointment expressly referred to the power itself.

WILL MAY BE REFORMED TO POUR OVER ONLY WIFE'S SEPARATE PROPERTY ASSETS TO HER SEPARATE PROPERTY TRUST

Wilkin v. Nelson (2020) 45 Cal.App.5th 802

The Second District Court of Appeal held that substantial evidence supported the trial court's reformation of a pour-over will so that it distributed only separate property assets, and not community property assets, to a separate property trust.

When husband and wife married, they each owned houses as separate property. In 2000, the wife retained an estate planning attorney to prepare a separate property trust to hold her separate property house, which would go to her sons upon her death. The attorney drafted the separate property trust, a deed transferring her house to the separate property trust, and a will giving the residue of her estate to the trustee of the separate property trust. After the wife's death, various actions were filed, including an action by the husband to reform the wife's pour-over will to include only her separate property. Applying Estate of Duke (2015) 61 Cal.4th 871, the trial court reformed the wife's will to exclude her community property, and to pour over only her separate property to the separate property trust. One of the wife's sons appealed.

The Court of Appeal affirmed. Substantial evidence supported the trial court's decision to reform the will to pour over only the wife's separate property to her separate property trust. Undisputed evidence established the wife's intent to execute the separate property trust for the purpose of gifting only her separate property home to her sons. The wife did not discuss her community property assets with her estate planning attorney or the will's potential impact on community property assets. Neither the wife nor her sons understood that her community property assets would pass under the will at the time of execution. Thus, no evidence showed the wife's intent to...