Statute of Limitation for contesting a trust

[cjjeffery]

What is the name of your state (only U.S. law)? California
Both of my parents died last year. My brother was left out of our mother's separate trust, but not our parent's joint trust. Because all estate taxes were directed to be paid out of the joint trust, our brother is threatening to file an action involving my sister and myself. My sister is trustee of our mother's trust. He is contesting having to pay taxes on money that only my sister and I benefitted from. He is also questioning whether the assets in Mom's trust were her separate property, but instead community property. We were in settlemnt negotiations and my sister and I offered to pay to him the amount of his share of the taxes. We all agreed to extend the 120-day statute to August 5th so we could further negotiate the terms. He backed out of negotiations, but it appears that he has not yet filed an action in Fresno County. So my question is: If he did not file an action by August 5th, how likely would it be that his case would be tossed out because the statute expired? How stringent is the statute? Also, my parents had the "contest and you forfeit" clause in both their trusts. How solid is that type of clause? Any info you could offer would be greatly appreciated. Thanks!

 

[seniorjudge]

Q: If he did not file an action by August 5th, how likely would it be that his case would be tossed out because the statute expired?

A: 0% likely. Google statute of limitations and affirmative defense.

 

[tecate]

My guess is the statute has run on contesting the "tax clause" of the joint trust. That would be the defense to a proration suit under Probate Code Section 20120. However, I don't think that covers a lawsuit to avoid half of your mother's transfers of assets to her separate trust under Probate Code Section 850. What does her will say?

The current law on no contest clauses (P.C. 21300) leans heavily in favor of upholding them. Maybe that's why you haven't seen a lawsuit, but you might see a "test" suit designed to find out whether the "real" suit under Section 850 would violate it.

 

[cjjeffery]

Thank you, Tecate. I needed a bit more info than I got from the previous response. I did Google everything and found a lot of ambiguity. My mother's situation was such that my father, who was the only bread-winner in their 64 year marriage, periodically gave my mother sums of money to both originally set up her separate trust, and then to continue funding it. My mother wanted that for her own security, and he gladly gave it to her to help grow it. The executor of their joint trust knows of my father's willingness to participate in that. Do you still think that the separate vs. community property issue would get vary far, or no? We did try to settle with our brother for the amount that he would be paying for the taxes. And it is our position that it was our mother's choice to leave him out (for some very good reasons, by the way) I appreciate your explanation on the statute of limitations.

 

[tecate]

If you have the evidence, why worry?

But if the issue comes up, you might consult a divorce attorney to help. They need to deal with Family Code Section 850 issues (under current and prior law) frequently.

 

[Dandy Don]

What type of trusts are these? I'm hoping that they are not A-B trusts.

Were they prepared by an attorney?

Is there specific language in the mother's trust that states her reason for leaving him out of it? That would have helped to avoid him contesting the trust.

The provision in the joint trust that says all "estate" taxes be paid out of the joint trust is somewhat problematic/ambiguous. Does that refer to estate taxes calculated on probate assets in a will or is there no will for either party and the taxes refers only to trust taxes?
Additionally, both trusts are administered separately/independently of each other and it's hard to see why a provision in one trust would be enforceable in a different trust.

Brother's feelings may be hurt at being left out of mother's trust which may be clouding his judgment somewhat. His thinking may be flawed, because his argument is incorrect. HE is NOT paying taxes on the money that his siblings got the benefit of--he is only paying taxes on HIS share of the joint trust. It is the TRUST that is bearing the expense of paying taxes, and that is on everyone's share.

Are the tax calculations being done by a certified accountant (someone who has experience in doing trust/estate taxes)? Has anyone thought of asking the accountant to do a spreadsheet of calculations about the taxes to try to explain that brother's argument is flawed? Hopefully his attorney has advised him that his argument won't fly or has no legal grounds. Too bad he wasn't smart enough to accept your offer of payment.

He is not officially contesting the trust if he is only questioning/asking for clarification on a provision of it.

DANDY DON IN OKLAHOMA ([email protected])

 

[cjjeffery]

Thanks everyone. In response to your questions, Dandy Don, both trust were drawn-up by attorneys, my mother's first in 1997. Then my father got around to doing his in 2004, and he signed his and my mother amended hers to coordinate with his on the same day in 2004. But apparently, it could have been orchestrated better, with less ambiguity regarding the tax issue. My mother did not state her reasons for leaving my brother out, but made it clear in the trust that this was an intentional act. While I'll agree that my brother's feelings are hurt, and will also agree that his thinking is flawed, he is essentially paying one/third of the tax for my mother's trust, because the joint trust that he does benefit from is redused by that amount. My parent's accountant, who has been their accountant for 30+ years is the trustee of their joint trust. He has done all the calculations and provided documentation to us all. Our offer to our brother was to be the amount that he was affected by these taxes, and I agree, he was stupid not to take it. Brother then began requesting unreasonal documentation such as 12 years of tax returns for both trusts, gift tax returns, which the trustee was advised by his attorney not to provide, as it could potenially benefit brother, and harm the sisters, and the trustee is responsible to all of us equally. Anyway, the statute for him to file an action has now run out, and I get different opinions on whether that matters or not. Any thoughts? I will research p.c. 850, 20120, and 21300. I thank you both very much for your help.