(April 7, 2023) - Eric N. Mann and Kathryn Kaler of Neal Gerber Eisenberg discuss case law in New Hampshire and California on amending revocable trusts to ensure the grantor's last wishes are honored.

Revocable trusts, also referred to as living trusts, can provide an efficient way to avoid probate, maximize the use of one's federal and state exemptions and provide asset protection for beneficiaries following the death of the trust creator, commonly referred to as the "grantor," if properly drafted, funded and administered.

As the name suggests, a revocable trust can be amended at any time during the lifetime of the grantor, generally by a written instrument delivered to the acting trustee. However, recent case law in New Hampshire and California underscores the importance of carefully reviewing local requirements, as well as the provisions of the trust agreement, when amending a revocable trust to ensure the grantor's last wishes are honored.

Last year, in In re Omega Trust, 175 N.H. 179 (2022), the New Hampshire Supreme Court was asked to review whether a series of emails exchanged between the grantor and his attorney that contained the grantor's specific instructions regarding changes to his revocable trust constituted a valid amendment. The terms of the trust agreement provided that the grantor could amend the trust agreement with notice only to the trustee and by filing notice of any modification with the trustee, and any such amendment would be effective when executed by the grantor "notwithstanding that the signature of the trustee is provided for, the trustee's signature being intended to denote the acceptance of the Trustee to serve in that capacity only."

During the grantor's lifetime, the grantor sent an email to his attorney requesting an amendment to his revocable trust and detailed the grantor's desired updates. The grantor's attorney responded to the grantor's email requesting clarification as to some of the changes. The grantor then responded to his attorney's emails with some additional changes, and the attorney again responded, confirming that the draft of the trust amendment would be further revised consistent with the grantor's email response. The grantor died before signing the amendment prepared by counsel.

A petition was filed in the New Hampshire Circuit Court seeking a declaration that the series of emails exchanged between the grantor and his attorney constituted a valid amendment to the grantor's revocable trust.

The Circuit Court dismissed the petition on the basis that (1) the grantor did not substantially comply with the provisions of the trust agreement in purporting to amend the revocable trust, and (2) the petitioner did not provide clear and convincing evidence that the grantor intended the emails to be the amendment to his trust.

The New Hampshire Supreme Court, rejecting the lower Court, held that applicable New Hampshire law provides that a grantor can revoke or amend a trust by two methods — by "substantial compliance with a method provided in the terms of the trust" or by "any other method manifesting clear and convincing evidence of the settlor's intent if the terms of the trust do not provide a method or do not expressly prohibit methods other than methods provided in the terms of the trust."

The Court found that there was nothing in the trust agreement that purported to make the method of amendment provided exclusive, and the terms of the trust provided that the grantor may amend the trust by filing notice of such amendment with the trustee and which amendment will be effective upon execution by the grantor.

Accordingly, the Court held that the grantor could amend his revocable trust by any method "manifesting clear and convincing evidence of the grantor's intent to do so." As such, the case was remanded to the lower Court to determine the question of fact regarding the grantor's intent and whether there was clear and convincing evidence that the grantor intended to amend his trust by email.

The method of amending a revocable trust has also been recently reviewed by California Appellate Courts, resulting in a split among the courts. Section 15402 of the California Probate Code governs the modification of revocable trusts and provides that unless the trust agreement provides otherwise, a grantor may amend his or her revocable trust "by the procedure for revocation."

Section 15401 of the California Probate Code provides for revocation of a trust either by (1) compliance with any method of revocation provided in the trust agreement, or (2) a writing, other than a will, signed by the grantor and delivered to the trustee during the lifetime of the grantor; provided, however, that if the trust agreement explicitly makes the method of revocation provided in the trust agreement the exclusive method of revocation, the trust must be revoked pursuant to the method provided for in the trust agreement.

The First, Third and Fifth Districts have held that because a trust agreement specifies the method for amending a revocable trust, and where the grantor expressed an intent to be bound by the method for amendment specified in the trust agreement, such method must be used regardless of whether the trust agreement expressly provides that such method of amendment is exclusive. See Balistreri v. Balistreri, 75 Cal. App. 5th 511 (Cal. App. 1st Dist. 2022); Pena v. Dey, 39 Cal. App. 5th 546 (Cal. App. 3d Dist. 2019); and King v. Lynch, 204 Cal. App. 4th 1186 (Cal. App. 5th Dist. 2012).

On the other hand, the Fourth District has held that a trust may be amended by the statutory method for revocation unless the amendment procedure set forth in the trust agreement is expressly exclusive. See Haggerty v. Thornton, 68 Cal. App. 5th 1003 (Cal. App. 4th Dist. 2021).

The Fourth District Court reasoned that Section 15402 of the California Probate Code does not establish an independent rule regarding trust modification, and that Section 15402 expressly provides that the method of modification is the same as the method of revocation. Accordingly, a trust can be amended by the statutory method of revocation unless the amendment procedure set forth in the trust agreement is explicitly exclusive. It is anticipated that the split among the California Appellate Courts will be resolved by the California Supreme Court, as both the Balistreri and Haggerty cases are pending review.

These recent decisions serve as a cautionary tale. Practitioners should carefully review applicable state law as well as the governing trust agreement when modifying revocable trusts to ensure that any amendment is enforceable by complying with the methods set forth under applicable state law and the trust agreement, as the case may be.