0:02 Who [music] are you? And where are you going? What do you want?
0:18 >> Hello and welcome to Trust and Estates Weekly. I'm your host Kevin Bemel and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and probate administration. Uh mostly from the standpoint of people like myself and my guest Andrew who do this for a living, but also for those of you who don't do this for a living. You maybe you got uh you know appointed as your parents' executor and now you're trying to get through this difficult process called probate and you need some information or would like to
0:54 be able to speak with your advisors uh more coherently. So uh this this uh hopefully will help you with that as well. So super glad to welcome back to the show Andrew Nuttall-Brown. Uh Andrew had was a guest um I gosh what about about 18 months ago I think? Year ago? Something like that. Um and uh Andrew and I have become close colleagues since then. We work we're working on uh a number of different things together. Uh and uh you know just uh frankly continue to be impressed at at Andrew's knowledge and
1:30 skill uh in in in this area as are all the people to whom I introduce him. So they're they're like, "Wow, this guy is really something." So uh so Andrew, welcome back to the show. Thanks for being a guest again.
1:44 >> Well, thank you. I'm not sure if I deserve that kind introduction, but I'll take it.
1:48 >> Okay. [laughter] Well, you know, you're going to have to suffer through my you know my my my adulation. So So Andrew, just it let's start out if you would kind of for especially for people who have you know not seen the previous show, tell us just a little bit about yourself so people can get to know you a little bit.
2:09 >> Yeah, so I'm I'm a senior counsel at Trust Law Partners based in Pasadena, but it's a law firm that stretches throughout California. Um and and also in in Texas and we have a a couple attorneys that are licensed in Nevada. But my background um is actually a um in Canadian estate planning. That's where I started my career and where I'm from in Ontario, Canada. And then around 6 years ago, I moved down to California. Um and then started practicing in in a lot of cross-border estate planning and
2:44 estate administration and and also estate and trust litigation as well. And then I recently joined um my new firm or at Trust Law Partners that was expanding their Pasadena office. And um and then most of my the cases that it seems that I'm involved in tend to be fairly large trust litigation cases where often there's some sort of tax uh aspect or estate planning aspect. Um and and typically I'm I'm assisting in in those types of cases. I still do some
3:19 estate planning but and administration but I primarily uh I'm working on trust litigation matters actually now.
3:26 >> Mhm. So, so a lot of litigation support. So, you know, last time we talked primarily about estate planning and especially you know, cross-border issues related that but so let's let's you know, let's kind of dig into this this issue of litigation. You know, how does it happen, you know, and and what what kinds of issues um cause you know, cause people to litigate, right?
3:57 >> Oh, uh tons. Um so, sometimes people will litigate when there's there might not on its face seem to be an underlying issue. Like if if people are gung-ho to sue each other, they'll find a way to do it. So, sometimes you'll have cases like that. Other times there will be discrepancies in trust documents or in estate planning documents where clarification is necessary. And sometimes that discrepancy has a dramatic impact on the rights of the underlying beneficiaries. Um and other times you will have
4:32 There's a lot of cases where there's a like an abuser or someone taking advantage of an elderly person. So, a lot of cases stem from that. And that's bigger or small. A lot of modest estates have the same issues as estates that are over 100 million. And so, we we deal with both. Um and uh Yeah. And and then from the cross-border dynamic, you can see that in the trust litigation cases as well. And so, I I have one where now where there's beneficiaries in three different
5:08 countries. There's a trust document that's disputed. And the terms of that document, whether they apply or not, have different impacts and for the beneficiaries in each country.
5:22 >> Mhm.
5:23 >> So, sometimes litigation can be almost an opportunity because it's can be a mechanism or or or a way in which you can get the parties together because they have to because there there's some sort of dispute involved.
5:41 >> Mhm.
5:41 >> Identify issues that are common to everyone and and then resolve it through either a mediation or an agreement that's supported by a court order.
5:52 >> Mhm.
5:53 >> So, you have just a wide variety of issues that that that litigate. And all of the issues that you see in planning can show its face in the litigation sphere as well.
6:06 >> So, this this is quite an interesting concept because I think almost always we think of litigation as bad, frankly, right? Because it it it takes time, it it it's costly, um it it it causes people to fight. But what you just said a moment ago is that by essentially having one or more parties file litigation, it it actually becomes the impetus for you know, working out whatever problems
6:41 exist. Peel that onion for us somewhat because I think this is I I I I have a feeling not too many people have ever uh you know, thought about that as even conceptually.
6:56 >> Yeah, and it might not be the reasons why people are litigating initially, but I'll give um I'll give an example. So, um there there's a file that I've had where the uh there's two different sets of trusts. One which might be considered an amendment of the first one.
7:21 >> Mhm.
7:22 >> Uh and the validity of the second trust is is in dispute because it's unclear whether this it's a um a married couple and it's unclear whether the surviving spouse under the trust terms had the right to modify the first spouse's share of the of of of the assets and where and where those go to.
7:45 >> Mhm.
7:45 >> [clears throat]
7:46 >> Um there's probably about three different interpretations of the initial trust terms and a lot of it hinges upon that. But one of the issues is in the middle of this fight, the estate's large enough that there would have been a very large estate tax that would have applied if um uh when the first spouse passed if the marital de- deduction wasn't wasn't permitted.
8:17 >> Mhm.
8:17 >> And under two of the three interpretations, it would not qualify for the marital deduction, which means there's roughly a 40% tax that would have been due when the first spouse passed away, which is around three years ago.
8:30 >> Right.
8:31 >> Um it also would have triggered likely some GST like generation skipping transfer tax uh to those beneficiaries and um and there was no GST allocation made uh from what I understand on on the initial estate tax return. Um so depending the outcome of that litigation could cause a scenario where the the trust would be liable for estate tax
9:08 that wasn't hasn't been paid. Uh there's mandatory penalties. You might be able to get those penalties waived given the circumstances, but certainly there would be interest that's due.
9:17 >> Mhm.
9:17 >> And and then the other issue is that a lot of the assets are inherited um outright. So the litigation in some ways is an opportunity where I'm hoping that this particular case goes to a mediation uh and you can craft a settlement agreement that to clarify the terms of the trust to ensure that the marital deduction does apply just to avoid that nightmare of a situation.
9:48 >> Mhm.
9:48 >> Um and and then potentially also in this particular case the surviving spouse might have breached his duties and he might there might actually be liability to some of the initial beneficiaries under that that existing um uh trust. And so you might even be able to craft a settlement where there's uh where the second spouse as trustee of that first trust uh has some liability and then that would actually allow for a deduction on the estate tax return. Um so
10:24 from taking these types of ideas or or approaches, you're making the pot that people are fighting over where initially the the thought process might be, "Hey, I'm I'm entitled to this proportion under this iteration of the trust document. Whereas on on the second one I'm entitled to a smaller portion. I want the larger portion." to making that whole pie larger. And that makes it easier to resolve cases. Um and uh and then ultimately the the result's going to be better than than what you're going to get if it were to go to trial several years down the road.
11:01 Where the consequences if of winning and for some of the beneficiaries also means that the estate tax liability is much higher. Mhm. And and the interest rates as you know are are are significant.
11:14 >> Right.
11:15 >> Another example and sometimes that the tax consequences I'm biased because because of my background I I I see these things where where perhaps um other friends and other litigants might not. But some of them foster settlement because like you have to give it like the omitted spouse example where a in California if a trust or a will is established prior to a marriage
11:46 >> Mhm.
11:46 >> and and then there's nothing actually given to the spouse outside of that trust and will and then they they pass away there's an omitted spouse doctrine where the spouse is entitled to essentially what they would receive had they passed away intestate without a will at all.
12:04 >> Mhm.
12:05 >> In a lot of cases that means essentially half of everything.
12:08 >> Mhm.
12:09 >> And uh now there might be a and I've seen it before where a lot of the children or the beneficiaries under that trust are trying to uh challenge or fight the omitted spouse spouse's claim
12:24 >> Right.
12:25 >> but they have a huge incentive on settling early if it's a large enough estate because there's going to be an estate tax due within 9 months.
12:34 >> Mhm.
12:34 >> And for every dollar you settle for this with the spouse, you get a marital deduction. So
12:41 >> Right.
12:41 >> 40 cents off every every dollar.
12:44 >> Mhm.
12:45 >> [clears throat]
12:45 >> And there might be hostility amongst the the family members, but those type of driving forces really get people to the table and it resolves disputes faster. And you can be you can be creative in that scenario like um I I I've never I've never done this in a case before but uh especially with the exemptions so high now at 15 million
13:12 >> Mhm.
13:12 >> um perhaps you could craft a a settlement where if the the classic example is the omitted spouse is much younger
13:21 >> Right.
13:22 >> and uh and and the deceased person is much older the deceased older person has much more assets than the than the younger spouse.
13:30 >> Mhm.
13:31 >> And the family wants obviously to receive what what what their father or mother had. Um but you could you could craft I think you could craft a settlement where you could have additional trusts funded perhaps with the spouse as an income beneficiary. But then you could use that spouse's GST exemption so that the assets could flow down to the family members.
13:58 >> Mhm.
13:59 >> And otherwise you would just lose that extra 15 million of GST exemption. So there those types of creative approaches come up a a a lot and um in the cases that at least that I'm involved in. And I I love working with counsel on the other side that that gets this type of thing and and really you can cuz we're in the dispute resolution business ultimately.
14:25 >> Right.
14:27 >> The court is a very inefficient way of resolving disputes.
14:32 >> For sure.
14:33 >> Even when you win you can you you can sometimes lose just by the cost of litigation and there's only so many outcomes that can come up when it it you reach the end of a trial.
14:48 >> Right.
14:48 >> And uh and so you have a lot of control agency and flexibility in in mediating cases and in negotiating things and and sometimes it requires court involvement because you might need an order modifying a trust.
15:03 >> Right.
15:03 >> Right.
15:04 >> Let's take a quick break and I have but then I have a follow-up question for you.
15:09 >> [snorts]
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15:48 or visit magnumprops.com. So, one of the thoughts I had as you were talking about uh you know, sort of litigation, you know, being as a springboard to to settle a case and and we're dealing with typically it it sounds like pretty you know, pretty complex uh situations here. So, my experience is um at least among some of the judges on on
16:23 the probate bench, they do not understand these kind of complex matters. So, I I I'm not sure if it's because these large matters rarely come before them, so they don't have a lot of experience with them or if they because they maybe don't have a business background or a tax background, so they're not used to dealing with these issues. So, you know, when you were working with one of these more complex situations where, you know, for example, I it it it was
16:58 interesting what you said about um crafting a solution where on the one hand the trust can take advantage of the full 15 15 million dollar spouse exemption, but then figure out a way to, you know, have some of the assets flow through the surviving spouse, maybe, you know, sort of onto the other family members, but still be able to take care of that, right? I'm I'm not sure judges would understand that even as a strategy. And so, how do you see
17:33 the um level of sophistication of understanding of the courts vis-à-vis working to uh you know, craft these kinds of creative solutions, which all clearly are for the for the benefit of the beneficiaries collectively, especially if if counsel, you know, on the other side does understand what it is you're proposing and and explains it to his clients, it is it is a great outcome, but, you know, now you if the court is in the mix,
18:08 you know, how how does how does that how how how does that or does that create uh you know, kind of a fly in the ointment, as they say?
18:17 >> Well, um in fairness to the judges on the bench, like they like they've got a difficult job. They have um each of them have hundreds of cases that they have to to deal with um every month. And um and and and it's not their job to find a creative approach to um to a beneficiary dispute. Really, it's it's the counsel that are in those cases, they're the ones that would have the bandwidth to to do it. They're representing their their clients. They
18:53 they're the ones that should be proposing these these um these ideas. That the judges the judges from the judges' perspective, they have to apply the law and um typically absent a settlement, you can't it would be improper for a judge to impose something that might be very creative like that um in in in a trust dispute, the provider a lot of latitude, but any and from what I just described that I don't see a scenario where a judge could unilaterally like uh implement that. That being said, there's a lot of petitions that I've
19:28 filed that seek to modify existing trusts that um and the judges I've not had any um material resistance to to affecting those solutions. Judges I I I find are favorable and supportive of the parties reaching a creative solution like like like I just the one I I I kind of described. Mhm. Um, and sometimes it might not even appear like it. So, I'll I'll I'll give an example. So,
20:04 this one there it's not even in the context of of litigation. It's it I was dealing with a um the administration of a trust. The first spouse had passed away. And um and under the terms, the assets after the passing of the second spouse uh goes outright to the children. Um and and uh it was in a um had the trust was set up where there's a survivor's trust and bypass trust. It was fairly straightforward. Now, a bypass trust it it's irrevocable.
20:40 It's not supposed to have that level of flexibility. But the assets have grown because the first spouse passed away quite a long time ago. And so now the bypass trust ha is very large and will pass to the surviving uh um children. And it's going to cause an estate tax issue for the children. Um so one thing that uh you you could I've done is I evaluate, okay, how what are the methods in which you can you can correct
21:15 this issue and and try to find a way to maybe restructure the bypass trust uh so that it avoids an estate tax at the passing of the children and and grandchildren and so on, which is usually the planner goal. Um so decanting in California is very limited. You You can only decant a trust uh and and and but you can't really change the beneficial interests. What I'm trying to accomplish is changing the beneficial interests um because you're trying to avoid the estate tax and and whatnot.
21:51 Um so their interests often have to be limited to at least an ascertainable standard for health, education, maintenance, and support. But what you could do is other states have broader um decanting statutes, modification statutes, so that's an option. But in California I've modified it where it the only change under the trust document is granting the surviving spouse a limited power of appointment. And so
22:26 the the there's only one clause that's inserted uh in uh that you're modifying. And you have to get the consent of all the beneficiaries. That's often not possible cuz often these trusts say if the children pass away, it goes down to the grandchildren, and there might be grandchildren that are not even born yet. But the test in California uh there's a helpful statute that allows you to make a modification as long uh even when a trust is irrevocable. Uh but you have to get the ideally the consent of the beneficiaries
23:01 uh who are likely to inherit. Um, and the change cannot frustrate the purpose of the of the irrevocable trust that's been established. So, you can limit that limited power of appointment to being exercisable only in favor of the descendants of the first spouse who passed away to help avoid concerns that the court might have that okay, you're really trying to change everything that that was set up by this person who passed away a long time ago. And but just giving that limited power
23:36 of appointment, right? You've now just given tons of flexibility because then the surviving spouse can exercise that power of appointment in favor of an entirely new trust for their kids and grandkids and great grandkids. And you've just saved a massive uh, tax issue. Um,
23:54 >> [clears throat]
23:55 >> and that again, like could be applied in the litigation context. If you're trying to look at creative solutions where those types of tax issues could apply, uh, you might be able to craft a settlement that that that that can really, um, avoid things that people might not even have been thinking of initially. On a smaller scale, for something that's much more common, uh, you you see a lot in property tax reassessments in California, which that affects far more people. Um, and uh, and those types of issues can can be
24:31 resolved because you might want to preserve the parent parent-child exclusion. Uh, you can only have one child take advantage of that. And um, and then there's a time limitation on uh, on when that can be applied for. So, uh, even that even on a on a much more modest level, that can be a driving force to reaching a settlement, especially if there's an interest in maintaining the property for a extended period of time. So, um you see that all all levels. Um So,
25:03 >> And and how how often are you challenged in finding creative solutions to litigation by uh Or well, let me let me let me rephrase the question. How much educating of opposing counsel uh do you find yourself having to do when you're seeking to uh you know, put together one of these creative
25:38 dispute solutions?
25:41 >> That can be a challenge, especially if their approach uh the opposing counsel's approach um might be a they're not they don't really try to drive those prac- those types of solutions. And and um but the useful thing that's specific to trust litigation in California is that judges can issue Breslin orders. And so again, it you know, in in the vein of of judges really trying
26:16 to promote creative solutions, I I I the judges are an ally in my view on on this issue. Because a lot of judges uh especially in Los Angeles County
26:29 >> Mhm.
26:29 >> uh they will issue Breslin orders forcing the parties to mediate uh at a relatively early stage. And once that happens, often a retired judge is usually retained and hired for that.
26:46 >> Mhm.
26:47 >> And uh and then that retired judge ends up being the driver of the educating because I'm obviously partial. I'm representing my beneficiaries, my side. I want the best result for them. And the and the opposing party if especially if they're it they engage in sharp practice, I'd be hesitant to to engage in that. But there are definitely retired judges and and and counsel that that
27:23 act as mediators that that have been instrumental in in really forming those those resolutions that that really work out for they they create a a solution that's that's better than what either party would get in the litigation sometimes. Not all the time, but but but sometimes for sure.
27:45 >> Right. Right. Well, and that that typically is the reason for for mediation is is hopefully to reach ideally to reach as at least as good a solution as one would have gotten through litigation if not better. But you know, okay, let's take another break and we'll continue. Probate and Trust TV, your curated source for the most useful and insightful content on estate planning and trust and probate administration featuring standout professionals like
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28:57 information that that helps you be able to craft these kinds of creative solutions? Um I I I mean I I'm requ- for my license, for example, I'm required to do 15 hours of continuing education each year. Um I will tell you the quality of the continuing education out there is it's not inspiring. Let's just, you know, put it in this area, right? Um and I would love to be able to improve my own
29:33 knowledge um because you know, I work with I work with lawyers almost I 75% of the time I'm in a situation where there's a dispute going on and I'm I'm in the I'm being brought in because there's a dispute. So, if I could bring you know, information to the table that would help resolve the dispute, especially if it's if it if it's essentially mutually beneficial to all the beneficiaries, so then you know, I I'd be doing an even better
30:09 job than, you know, frankly, I think I do right now. So, where where you know, what what where are the places to to learn about this?
30:19 >> My there's a lot of conferences um that that I I attend um and and our firm attends. Um some of the best ones, honestly, I I there's a organization called STEP, uh the Society of Trust and Estates Practitioners. And that's been useful for me actually on on the international level because they there's STEP in Canada and the US and France, UK. The STEP is I think actually based in originally in the UK. Um in Asia and whatnot. And it's it's like a those
30:54 conferences especially the one that's hosted in Los Angeles we're lucky because it's it's actually an international um planning and tax conference.
31:04 >> Mhm.
31:05 >> And you get a meeting of of the minds really from from all these different jurisdictions. So the quality of the of the programming um through STEP is is really high in my view.
31:18 >> Mhm.
31:18 >> Uh there's some tax conferences that at least for for me have been really helpful. One that's in Hawaii that um I've attended the last 2 years. Both times there's been some I've I've had some discussions with other lawyers and some kinds of presenters there. And we kind of craft new ideas. Um and and bounce ideas off each other. And both times that I've I've went I've come back and I've implemented things that were kind of concepts that we're we're discussing at that conference.
31:53 Um but yeah, you get variety in the quality of of see of continuing education for sure. Um but I think it's good to be well-rounded. Uh I I don't think it's for for a professional trustee, I don't think it's their job to to know everything. But it's good to issue spot.
32:15 >> Mhm. [clears throat]
32:15 >> And then and then get guidance from from someone who who's in that niche field. Whether it's a CPA, an attorney, or on a tax issue. Uh but like I like for instance, I would never touch a um like eviction issues for example. Because I know that that varies in California.
32:38 >> Mhm.
32:39 >> Municipality by municipality and and that's actually a specialized They should it should be a specialized area. You don't want to dabble in that.
32:49 >> For sure.
32:50 >> And and so I I I I think the issue being well-rounded is probably the I I think a goal as a professional trustee and then just knowing that okay, there might be an issue here that that could be explored. There might be an issue on on these at at these levels that that can be explored and and what's the way to address it? And from a mediation context, I try to find issues that affect everyone.
33:17 >> Mhm.
33:17 >> And and that might not be what originated the dispute, but it might be the driving force to a resolution. So.
33:24 >> Mhm. Yeah. So, bringing this kind of background to what we talked about last time you were on the show, what can um uh settlers do to um maybe better facilitate resolutions to disputes um at the time they're putting their estate plan together.
33:59 Um and and and and I say to resolve because obviously you want to avoid disputes, but but they they happen anyway and um you like typically in you know, in a real estate contract, right? Um it'll call for mediation first and then arbitration and then then litigation, right? And you you have to go through those steps before typically before the judge will you know, set a trial date. So, um what what can what can um when they're you know, planning their
34:35 estates that can, you know, perhaps anticipate uh disputes that could lead to litigation and provide a better path for, you know, for how that's handled.
34:49 >> That's a great question. Um sometimes it's not the settler's fault and it's something that the settler the settler is often a vic- a victim in a a lot of this litigation. Um particularly in the context where there's elder abuse and there and there they might have capacity issues and they might be dragged around from attorney to attorney and you at at by the abuser until there's an attorney that's found that's willing to do the estate plan without doing their due diligence. And and there's a ton of cases like that and um
35:25 really it's it it's the the people that are close to them are the ones that that are able to protect them. And the settler might not they might not be com- it's undue influence means that the influence is so extreme that really they've lost their their free will. So at that point for those types of issues like it's it's beyond the control of the of the settler realistically. But for the ones that aren't like that, um a lot of the disputes I I think come up where they're
36:00 there might be some underlying conflict amongst The classic example is amongst the the children and and and their sibling conflict.
36:08 >> Right.
36:09 >> And it might have originated from child- early childhood. And sometimes surprising and they come up at these mediations sometimes and it's sho- it's shocking because it they'll bring up things like when they were 4 years old they were pushed down the stairs by their older brother or or things along that vein. And it's And And meanwhile, they're they're well into their 60s. And so, some some things are are just deep-seated resentment. Honestly, I I think a good way of avoiding that is by appointing someone a completely
36:45 neutral as a trustee. Mhm. Um despite the the You see a lot of conflict where they appoint you know, all of their children as co-trustees thinking that they're going to be forced to work together.
36:59 >> Mhm.
36:59 >> And then that ends up
37:02 >> [laughter]
37:02 >> not working well.
37:04 >> Yes.
37:05 >> Um and And then you have the other issue where they're like, well, I'm going to appoint this one child. And he might be He or she might be perfectly capable of handling it.
37:15 >> Mhm.
37:16 >> [clears throat]
37:16 >> But the origin of a lot of the trustee beneficiary disputes is from a lack of effective communication.
37:26 >> Mhm.
37:27 >> Uh the process often takes a lot longer than people realize. And so, uh they might be expecting receiving their inheritance or or their interest uh within a very short timeline. And even though the the trustee child is is working diligently, um they're just not communicating effectively. Uh And it it it might be hard to predict from as the settler, as the trust creator, what's going to happen maybe a
38:02 decade down down the road. Your your children are often full-time. They've got their own families to deal with. A trustee is I I I don't see it often as an honor. It's It's really a burden to to be a trustee. And that's why it's a whole profession in in California. And the the hesitation to appointing a professional trustee because of the cost is sometimes it is sometimes not well based because the amount of money that's being saved by appointing
38:39 that neutral person who's going to have good typically will have good communication skills
38:45 >> Mhm.
38:45 >> uh knows how to administer a trust is is is less likely to trip up on the common tasks, the common issues that you face on a daily basis
38:53 >> Right.
38:53 >> marshalling accounts, things like that. Um and uh and and then and then the lack of distrust cuz they are entirely neutral. They're a third person. They have no stake in the game. They're not a beneficiary themselves.
39:06 >> Mhm.
39:07 >> Often that's a great solution that you might be able to avoid a lot of these common conflicts cuz typically the conflicts are there's an abuser so that that's that's one set of conflicts
39:19 >> Mhm.
39:19 >> uh a lack of capacity um so those are kind of go hand in hand and then there's uh a lack of communication by by the trustee that and and or just basic distrust where a trustee is a beneficiary and and the other beneficiaries are thinking, "Well, they're he's dealing for for himself or herself."
39:43 >> Mhm.
39:43 >> [clears throat]
39:43 >> Um so yeah, that my best suggestion is maybe don't um m- maybe actually take strong consideration of in appointing a a third party
39:59 >> Mhm.
40:00 >> neutral like a professional trustee to uh to to administer it rather than than your your your eldest child who it's not an honor. It It might really create wreak havoc in in your family after you pass.
40:15 >> Right. Right. I I think I've seen trusts where uh if if a beneficiary um you know, challenges the trust, then the beneficiary is in essence just inherited. Um and and I'm I I've never seen that actually happen. Um I'm I'm wondering what what you think of of that as as uh an aspect of this, you know, issue.
40:43 >> Uh I I the vast majority of trusts have those no contest clause clauses. In California, a no contest clause is enforceable when um only when the the contest is brought without reasonable cause.
41:01 >> Mhm.
41:01 >> And so, the question and at the outset of the litigation, it's hard to assess what whether it's reasonable or
41:07 >> Right.
41:08 >> or not. And um but really you don't see the impact of those no contest clauses until the end of the trial. Because if it goes actually to a trial and the contest loses, there's likely going to be a decision by a trust by the judge outlining very specific reasons as to why the trust document was valid.
41:37 >> Mhm.
41:37 >> So, I see those no contest clauses as being um effect like actually pursued after the decision is done. The other driving force why it's not pursued a lot in California um is also because the there's uh an anti-SLAPP motion you can bring. So, basically, it's a motion there's a statute in California that and the purpose of it is to prevent
42:12 people from from suing
42:15 >> Mhm.
42:15 >> uh solely for the purpose of uh preventing people from exercising their uh their first amendment rights.
42:26 >> Mhm.
42:26 >> Um so like freedom of speech. But that includes the right to petition the court to seek judicial relief.
42:36 >> Mhm.
42:37 >> And so a no contest clause, if you're bringing a motion for a no contest clause saying, "Hey, they've contested the validity of this trust. Therefore, court enforce this clause and and and confirm that they are disinherited." When you do that, that necessarily triggers the anti-SLAPP legislation. [clears throat]
43:00 >> Mhm.
43:00 >> The counter filing for that is the beneficiary who's now contesting the validity of the trust files an anti-SLAPP motion which um which triggers the uh at the very outset of the litigation um a [clears throat] freeze on discovery and um and then often those those anti-SLAPP motions are won by the beneficiary.
43:32 >> Mhm.
43:32 >> And [clears throat] that um and then there's there's like a cost consequences and all of that. So the reason why it's probably not pursued a lot in California is because it's it's narrowed in enforceability where it's only enforceable when there's no reasonable cause to doing so. And if And if there's a trust amendment that was done by an an elderly person who who had maybe early onset dementia
43:57 >> Right.
43:57 >> Alzheimer's, then there might be reasonable cause even if they did have capacity.
44:02 >> Right.
44:02 >> And And so so they're not pursued a lot because of that and then the anti-SLAPP legislation. Other states like Ohio for instance, and I only know this cuz I I had a case before that was like pro- had Ohio and California um portions of the estate and then there's an Ohio trust that was involved. The Ohio In Ohio, at least a couple years ago when I had this one where I was involved in this one, in Ohio, the there is no reasonable cause limitation. So, it's all or nothing. So, if a beneficiary files a
44:41 petition or an action contesting the validity of the trust and then ultimately loses, there might have been reasonable cause in doing so, they're entirely disinherited.
44:50 >> Wow.
44:50 >> And and then you you really have to be sure that you're going to be successful, especially if like it's an amendment that changes your interest from let's say 50% to 30% or something like that.
45:04 >> Right.
45:04 >> Like do you really want to risk it at that point?
45:06 >> Yeah, you're really you're really rolling the dice. Yeah.
45:09 >> There's pros and cons to both. Like I I I think from a fairness level, I think people should have the ability to contest something that they reasonably think is invalid without the risk of in- disinheriting completely yourself.
45:23 >> Mhm.
45:24 >> Uh but there's also an aim in trying to avoid these types of disputes in the first place. So, I think it's a balancing act. Every jurisdiction will deal with it differently.
45:34 >> Right. So, so last question cuz unfortunately we're running out of time. Uh you know, a a trust is really essentially a contract. So, um Uh how can a settler or can a settler, I guess, is the better question. Can they uh require mediation if a dispute arises before litigation in the same way, for example, that real estate contracts often do.
46:04 >> [snorts]
46:04 >> There are um like dispute resolution clauses I've seen before and I and I've seen trust litigation be um be thrown into arbitration. So, that that can be done. Um Yeah, so I guess in short it it can be. Eventually, I think if it results in an order, it's going to have to be approved by the probate court and there's going to be some limitations to what you can do. Like the art um an arbitration order Like I'll give an example. So, this is actually was a the the one of the cases that had
46:39 um mandatory arbitration and and was sent to arbitration. I wasn't involved in that case during the arbitration. I was involved after actually an order was issued, but the other side appealed because in California, there's a very strict statute of limitations that apply after a a notice a trustee notification is sent to the beneficiaries. Um provided certain requirements are met with the copy of the trust document, it triggers a strict 120-day period to um contest the validity of the trust.
47:14 And so, the issue is that the arbitration order invalidated some of the amendments when there wasn't a trust contest actually filed. And so, it just exceeded the arbitrator's authority to do that. And so, that was an issue on appeal. We ended up settling, so we didn't actually get to uh to argue it. Um but But yeah, so there is a I've seen it before. Um Arbitration's still expensive, though.
47:43 >> Right. Yeah. Yeah.
47:46 >> Yeah.
47:46 >> Mediation is usually the least expensive route. Uh so.
47:50 >> Yeah, and and and I think we're lucky. Like other types of practice areas, the court does not have the authority to really They can issue orders like asking you to mediate, but the difference is that in trust litigation if you don't show up to the mediation, the parties that do can issue a can reach a settlement that can be binding on everybody. And that's that was initiated by um a case called Breslin where there's several beneficiaries, some a
48:25 judge issued an order uh requiring mediation and and then some of the beneficiaries didn't show up. They were settled out essentially. And then the judge um approved the settlement despite the lack of consent of the beneficiaries. And and part of it is a necessity because sometimes the one the one the one trust I'm dealing with now, there's 88 parties. So, there's a riot at my office every time I file something because they in depth to send 88 copies of the the
49:01 200-page document that I'm serving.
49:04 >> Oh my gosh.
49:06 >> [laughter]
49:08 >> So, yeah, yeah. So, so that that's that's a case that cried for
49:12 >> If he really doesn't do it, he don't get the environmentalists on him that he's cutting down too many trees.
49:17 >> Yeah, no, that's that's not happening at all. Like you still have to mail these things out. And um that that case is crying for Breslin already because you don't want to be able to reach a creative settlement with in theory 87 of the 88 people. One doesn't show up and then it doesn't get approved, right?
49:35 >> Yeah, yeah, for sure. Wow. Well, Andrew, this this has been fascinating certainly for me and I think you know, the viewers have found it fascinating as well. So, I I really appreciate you're sitting down with me on this again. We're going to have to We're going to have to do another show sooner than, you know, a year or year and a half because there's there's so much more to dig into. Um but uh you know, really want to thank you very, very much for for spending the time with me today. For those of you who are watching or listening, if you look just down below,
50:12 you'll see the show notes and Andrew's contact information will be there. If If you have a matter that uh with which you think he can help you, um you know, do not hesitate to get in touch with uh with Andrew and I know he'll be happy to to speak with you about it and um and help you or point you in the right direction. So, uh so real quickly wrapping up and then we'll we'll talk a minute offline. Uh schedule of shows, Mondays at 10:00 a.m. Pacific time, like today, Trust and Estates Weekly. Tuesdays at Pacific time, Business Lessons from the
50:47 Military. Wednesdays at 10:00 a.m. Pacific time, uh People Making Money. And then every other Thursday at 5:00 p.m. Pacific time is my show Jigger's This Place where we have a cocktail and a schmooze, talk about all things not related to finances. So, Andrew, once again, thank you so much for for joining me today. And that just leaves me to sign off by saying, "Marie darling, you are my bell." Courage at all times, my friends.