How Should a Revocable Trust be Amended in California?

In the recent case in Diaz v. Zuniga, the appellate court had to decide which of two provisions governs a settlor’s purported amendment of a revocable trust—Probate Code section 15402 or the terms of the trust—when the trust instrument specifies how the trust may be modified but does not state that the specified modification method is exclusive.

California courts are divided on this issue, and it is currently pending before the California Supreme Court in Balistreri v. Balistreri, King v. Lynch and Haggerty v. Thornton.

The appellate court concluded the trust terms governing amendments control and applied the reasoning of the courts in Balistreri and King.

The settlor’s purported amendment in this case did not conform to the trust terms and was held invalid.

The appellate court therefore affirmed the trial court's judgment invalidating the purported amendment.

A settlor purports to amend his revokable trust. He is both the trustor and trustee. The trust document (the Trust) provides that to amend the Trust he must send the document by certified mail to the trustee. This he did not do.

Here the appellate court decided his purported amendment did not conform to the trust terms and was invalid.

The Trust became irrevocable upon the death of the settlor, Mateo Diaz (Mateo), on May 6, 2018.

Soon after Mateo’s death, a purported trust amendment dated in 2007 was found in an envelope among papers in a container kept in Mateo’s bedroom closet. The stamped envelope was addressed to his attorney. There is no evidence in the record to indicate Mateo discussed the 2007 document with anyone or that he mailed it to his lawyer.

Article X of the Trust governs trust amendments. It states in relevant part: “The Trustor may at any time during Trustor’s lifetime amend any of the terms of this instrument by an instrument in writing signed by the Trustor and delivered by certified mail to the Trustee.”

Article IX of the Trust governs revocations and states in relevant part that “[t]his Trust may be revoked in whole or in part by the Trustor during Trustor’s lifetime.”  

Appellants Robert Diaz (Robert), Jessie Diaz, Alex Diaz, Carmen Ortega, Gloria Redondo, Linda Johnson, Annette Roberts, and Salvador Diaz (collectively appellants) are beneficiaries of the Trust.

Robert is also a co- trustee of the Trust. Respondent Marisela Zuniga (Marisela) is also a co- trustee and beneficiary of the Trust.

The 2007 document purported to alter the distribution of certain Trust assets upon Mateo’s death, substantially reallocating the value of the distributions among the various beneficiaries. The Trust assets include two real property parcels located in Montclair and Temple City.

In the original Trust declaration, the Montclair property was to be distributed equally to all of Mateo’s seven siblings; and the Temple City property was to be distributed solely to Marisela, with the exception of the sum of $100,000, which was to be distributed solely to Annette Louise Roberts Diaz.

In the 2007 document, the Montclair property was to be distributed equally to only two of Mateo’s siblings, and the Temple City property was to be distributed 10 percent to Marisela, 20 percent to Annette Louise Roberts Diaz, and 10 percent to each of Mateo’s seven siblings.

Robert and Marisela, in their respective capacities as co-trustees of the Trust, filed separate petitions requesting instructions as to whether the 2007 document should be treated as a valid Trust amendment.

The parties submitted a joint trial statement and a joint statement of stipulated facts and agreed to the admission of certain documents. The matter was tried on April 28, 2021.

The trial court issued a final statement of decision ruling that the 2007 document did not constitute a valid amendment to the Trust because Mateo did not deliver the 2007 document to himself as trustee by certified mail, as specified in Article X of the Trust.

A judgment decreeing that the 2007 document did not constitute a valid amendment to the Trust was entered, and the appeal followed.

The Probate Code governs modification and revocation of a trust.

Section 15401(a) sets forth alternative methods for revocation. Under the first method, a trust may be revoked by “compliance with any method of revocation provided in the trust instrument.”

Under the second method, a trust may be revoked in “a writing, other than a will, signed by the settlor . . . and delivered to the trustee during the lifetime of the settlor.”

The statute states, however, that if “the trust instrument explicitly makes the method of revocation provided in the trust instrument the exclusive method of revocation,” that method must be used.

For the trust revocation terms to override the statutory revocation provisions, the trust must contain “an explicit statement that the trust’s revocation method is exclusive.”

Section 15402 governs modification of a trust, and states: “Unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation.”

Under section 15402, when “the trust instrument is silent on modification, the trust may be modified in the same manner in which it could be revoked, either statutorily or as provided in the trust instrument.”

California courts are divided as to what happens when the trust instrument specifies how the trust may be modified but does not state that the specified modification method is exclusive.

In one line of cases, courts have held that when the trust instrument “specifies how the trust is to be modified,” then “that method must be used to amend the trust.”

In contrast, the court in Haggerty and the dissent in King concluded that unless the trust terms expressly preclude the settlor from using alternative statutory methods to modify the trust instrument, the modification procedures set forth in section 15402 may be used.

The appellate court found the reasoning of the courts in Balistreri and the King majority more persuasive than that in Haggerty and the King dissent.

The plain language of section 15402 states that a settlor may modify the trust by the procedure for revocation set forth in section 15401 “[u]nless the trust instrument provides otherwise.”

That qualifying statutory language is clear and unambiguous, particularly when read together with section 15401. Unlike section 15401, section 15402 does not require the trust instrument to “explicitly” state that the method of revocation provided in the trust instrument is the “exclusive” method of modification for the trust terms to displace the statutory modification provisions.

 The trust instrument in this case distinguishes between revocation and modification. Article IX addresses revocation and includes no specific procedure for doing so. It simply states: “This Trust may be revoked in whole or in part by the Trustor during Trustor’s lifetime.”

Article X, in contrast, includes a specific procedure for trust modification. It states that the Trustor may “amend any of the terms of this instrument by an instrument in writing signed by the Trustor and delivered by certified mail to the Trustee.”

Had Mateo followed the amendment procedures set forth in Article X of the trust, his intention to modify the trust terms would not be in doubt. On the facts presented here, Mateo’s intentions are unclear.

After drafting and signing the 2007 document, Mateo may have placed the document in his closet in order to reflect on the proposed changes before finalizing them. That he did not do so by sending the document to himself by certified mail may indicate that he decided against the modifications.

Section 15402 does not apply here because Article X of the Trust provides a specific procedure for modification of the trust terms. Article X therefore displaces the alternative statutory modification procedures under sections 15401 and 15402.

A contrary result would frustrate the intent of the trustor, Mateo, who chose a specific method for amending the Trust terms.

The 2007 document did not conform to that method and did not constitute a valid amendment of the Trust. The trial court did not err in reaching this conclusion.

That Article X of the Trust uses permissive, rather than mandatory language, stating that the trustor “may” amend the Trust terms, does not make the alternative statutory procedures available.

Article X sets forth a specific method for amending the Trust terms—“by an instrument in writing signed by the Trustor and delivered by certified mail to the Trustee.” Trust amendments may be made only by this method.

Mateo’s intent as trustor is evident in Article X, which sets forth a specific method for amending the Trust terms.

LESSONS:

1.         California courts are divided as to what happens when the trust instrument specifies how the trust may be modified but does not state that the specified modification method is exclusive.

2.         The trust provisions for modification and amendment should be followed to insure the amendment is valid.

3.         The Probate Code governs modification and revocation of a trust.