Creating and Amending Trusts
Many Californians, especially seniors, create trusts to hold their assets. The trusts may be fully revocable by the individual creating the trust (known as the “settlor”) or irrevocable during the settlor’s lifetime. If revocable, the settlor can change or amend the trust provided he or she still has the legal capacity to do so. When the settlor, often a senior, is suffering from cognitive impairment or memory loss, the issue of capacity is a serious one and there are persons ready to turn the settlor’s diminished capacity to their own benefit.
The California and Alameda County trusts and financial elder abuse attorneys at Evans Law Firm, Inc. represent settlors, families and trust beneficiaries harmed by those who take this advantage of seniors. We want to share some of the concerns about capacity issues with you. If you or a loved one has been a victim of financial elder abuse or exploitation of a senior with respect to his or her trust here in Alameda County or elsewhere in California, contact the Evans Law Firm, Inc. trusts and financial elder abuse attorneys at (415) 441-8669 and we can help.
The mental capacity required to create or amend a Trust is often referred to as “Contractual Capacity,” because legally a trust agreement is a form of contract. In order to create a valid Trust, or execute a valid amendment or restatement of a trust, a person must be able to understand and appreciate the following:
- The rights, duties and responsibilities created by, or affected by the decision,
- The probable consequences for the decision maker and, where appropriate, the persons affected by the decision, and
- The significant risks, benefits, and reasonable alternative involved in the decision.
This trust or contractual capacity standard is much more stringent than the capacity required to create a Will. The capacity required to make a Will (referred to as “Testamentary Capacity”) requires a person creating a Will to
- understand he or she is creating a Will,
- understand what property he or she owns, and
- understand his or her relations to the persons who have claim to their assets (usually his or her children) and whose interests are affected by the terms of the Will.
The capacity necessary to create or amend a trust demands that the person understands and appreciates the consequences of the decision being made. This is not a requirement under Will capacity. A person can create a Will without knowing, understanding or appreciating the consequences that Will may have on himself or others.
These two different levels of capacity are significant when an older person may be in the beginning stages of dementia, Alzheimer’s or memory loss. It is likely a person with the beginning stages of dementia has the capacity to create a Will, but may not have the capacity to create, amend or revoke a Trust.
Taking Unfair Advantage of Diminished Capacity
Unfortunately, there are persons ready to take advantage of a settlor’s diminished capacity, and get themselves inserted into a trust as trustee and/or beneficiary. Once appointed trustee by dubious amendment, these persons may breach the fiduciary duty they owe (to the settlor, trust and true beneficiaries) by embezzling or commingling funds, failing to transfer assets into the trust in accordance with the settlor’s direction, failing to administer and dispose of the trust assets in accordance with the settlor’s instructions, putting their own financial interests first, or losing or mismanaging trust property.
All of this misconduct may constitute both breach of fiduciary duty and financial elder abuse. California law provides a variety of remedies for those who have been injured as a result of a trustee’s breach of fiduciary duty. California Probate Code Section 16420 allows an injured party. The remedies include damages, including treble and punitive damages in certain cases, sustained due to the trustee’s misconduct. Equitable remedies are also available for compelling the trustee to account for trust assets, dispose of those assets pursuant to the trust instrument, and restore to the trust any assets wrongfully taken out of it.
The Probate Code also expressly allows injured parties to pursue any other remedies available under California law. Trustee misconduct often also constitutes financial elder abuse against senior settlors. In such cases, plaintiffs can pursue the remedies available under the California Elder Abuse and Dependent Adult Civil Protection Act, Welf. & Inst. Code § 15600 et seq. Under that statute, the court awards mandatory attorneys’ fees and costs and extra damages in certain instances.
If you or a loved one has been a victim of financial elder abuse or a breach of fiduciary duty by a trustee in Alameda County or elsewhere in California or, contact Ingrid Evans and the other Evans Law Firm trusts and financial elder abuse attorneys at (415) 441-8669, or by email at <a href=”mailto:firstname.lastname@example.org”>email@example.com</a>. Our attorneys have experience with complex securities cases, arbitrations, and mediations; and complicated financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We also handle cases involving financial elder abuse, qui tam and whistleblower cases, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.