Every estate planning attorney has a few clients that play the revolving beneficiary game with their estate plan. They get mad at a child (often for good reason) and amend their living trust to disinherit the child. Two years later they decide to reinstate that child as a beneficiary and amend their living trust again. And this may go on for several cycles with different children.
In Gregge v. Hugille (July 2016), the California Appellate Court ruled that a disgruntled beneficiary gets his day in court.
In 1990, William and his wife created a living trust. His wife died shortly after, and, following her death, William amended his trust six times.
- In 1997, William amended his trust to leave $900,000 to a trust for his grandchildren with the remainder to his four children – each to receive 30% or 35%, except for son Michael, who was only to receive 5%.
- In 2000, Willam disinherited Michael.
- In 2001, William removed Michael’s children as beneficiaries of the grandchildren’s trust.
- In 2002, William reinstated Michael’s children as beneficiaries of the grandchildren’s trust
- In 2005, William removed one of Michael’s children, Cameron, as a beneficiary of the grandchildren’s trust
- In 2008, Willam reinstated Michael as a beneficiary with an equal share as his siblings, and he reinstated Cameron with an equal share as the other six grandchildren.
In 2011, William died with trust assets in excess of $4.2 million.
One of William’s grandchildren, Bennett, filed a petition in California probate court challenging the validity of the 2008 amendment. If the 2008 amendment was ruled invalid, Bennett would get a bigger share. Bennett alleged that William was incompetent when he signed the 2008 amendment and that Michael exerted undue influence over William.
To stave off the litigation, Cameron offered to waive his share in the grandchildren’s trust thereby giving the other grandchildren a bigger share. The trial court liked this offer, and dismissed Bennett’s claim citing public policy disfavoring will contests.
Bennett appealed, and the appellate court reversed the trial court’s ruling. It held that the trial court’s decision was an abuse of discretion and ruled that Bennett was entitled to a trial on the merits.
Moral of the story: Be slow in your decision to disinherit a child. It may be entirely appropriate to disinherit your child, but leaving a paper trail of disinherit, reinstate, disinherit and reinstate, looks unstable, and could open the door for a disgruntled heir to challenge your final wishes.