Judge: H. Jay Ford, III, Case: 19SMCV03381, Date: 2024-04-10 Tentative Ruling


Case Number: 19SMCV03381    Hearing Date: April 10, 2024    Dept: O

MARCO YALE NEHORAY, et al. vs SABET 2015 LIVING TRUST, et al. 

CASE NO. 23SMCV03381

 

Petition to Approve Compromise of Disputed Claim

Continued Hearing date: 4-10-2024

 

TENTATIVE RULING

 

            Having reviewed the petition, and in particular the terms of the proposed “Settlement Protection Trust,”  (Petition, pp. 8-9, sec. 18, Attachment 8(b)(2) with attachment A to the proposed order) is continued to:_____________________________.

 

            If the petition is to be resubmitted requesting a court supervised minor’s trust, the Court orders Petitioner to provide a complete revised trust instrument that makes the trust revocable by plaintiff at age 18, removes the distinctions at plaintiff’s 18t birthday, and to removes terms that are otherwise not suitable for inclusion in a minor’s trust and submit a revised proposed order consistent with the terms of the revised trust. 

 

            Upon the filing of the revised petition and proposed order, counsel for petitioner is ordered to comply with LASC Local Rule 4.115(c) by lodging with the Probate Division (at the Probate Division filing window) the face page of the petition with a copy of the revised trust and revised [proposed order attached.

REASONING

 

            The main requirements for court funded trusts are set forth at California Rules of Court (CRC) rule 7.903(c) and LASC rule 4.116(b). 

 

            Petitioner proposes to fund the proceeds into a minor’s trust (not a special needs trust (SNT)) that normally would become revocable at plaintiff’s election when plaintiff/beneficiary reaches 18 years old.  Minor’s trusts must become revocable at the 18th birthday, and in fact the settlement funds should not be encumbered past plaintiff’s 18th birthday.  Here, the trust instrument specifies that the trust becomes revocable at age 18, but only for 30 days then it becomes irrevocable until age 30 (Section 104, court’s pdf at p. 85; Section 3.01, court’s pdf at p. 87.)  That construction is improper.  While a minor’s settlement trust is on the list of allowable recipients of settlement proceeds for a minor pursuant to Probate code section 3611, subsection (g) states only (emphasis added):

 

That the remaining balance of the money and other property be paid or delivered to the trustee of a trust which is created by, or approved of, in the order or judgment referred to in Section 3600. This trust shall be revocable by the minor upon attaining the age of 18 years, and shall contain other terms and conditions, including, but not limited to, terms and conditions concerning trustee's accounts and trustee's bond, as the court determines to be necessary to protect the minor's interests.

 

            There is no provision in Probate Code 3611 to allow petitioner to make the trust revocable only for a specified period after plaintiff’s 18th birthday, and instead the trust must be generally revocable after age 18. 

 

            Moreover, many terms in the trust instrument provide for different terms or requirements before plaintiff’s 18th birthday than after.  For example, Section 3.01 et. Seq. provide different terms regarding distributions.  Sections 7.01 et. Seq. provide for different requirements for bond and accountings for before and after plaintiff’s 18th birthday.  And other such terms are spread throughout the trust instrument.  There is no basis in law for these reduction in duties to plaintiff and the court’s trust supervision after plaintiff’s 18th birthday.  As discussed below, CRC 7.903(c) establishes requirements for trusts funded by court order.  The measure for whether those requirements are present in the trust instrument is when the court approves the funding of the trust.  Then those required provisions would exist for the life of the trust.  There is no provision for those requirements to roll back at age 18. 

 

            Finally, the trust instrument contains many terms and powers at Section 8.01 et. Seq. that are inappropriate to minor’s settlement trust, including agricultural powers, business powers, environmental powers, powers to merge trusts, real estate powers, settlement powers, etc. (a non-exhaustive list) that are incompatible with the fiduciary duties of a trustee for a minor’s settlement trust and that would violate the investment restrictions of Probate Code section 2574 as required by CRC rule 7.903(c)(4).  The Court orders the trust instrument be revised to be suitable for a minor’s settlement trust. 

 

TRUSTE AND BOND:

            The proposed initial trustee is Fariborz Saidara who petitioner describes as an attorney and family friend.  Normally, bond must be required of a trustee unless the trustee is a corporate fiduciary.  (California Rules of Court, Rule 7.903(c)(5), Probate Code section 2320.)  The proposed trustee does not meet the definition of a corporate fiduciary.  Petitioner calculates $588,000 bond base upon the assets to be funded into the trust, plus anticipated annual income from investments and any annuity, plus an additional amount required for the costs of any recovery on the bond.  That amount appears to be correct.  The Court orders a  bond in the amount of $588,000 be submitted by the trustee to this department (which will later be resubmitted to the Probate court in any trust supervision action).    

 

ORDERS/PROPOSED ORDER:

            The Order requires first trust accounting in one year.  (order pdf at p. 8, para. 6).  The Order is to be revised to add an actual 14 month calendar due date which will be used by the Probate filing window to set the first OSC date for the accounting. 

            The Order requires filing of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 04, but no due date is set.  The Order must include language that the filing must be made within 60 days. 

            Order fails to set OSC in this civil department in approximately 60 days to ensure funding of settlement, submission of bond if required, purchase of annuity if relevant, and filing of LASC Form PRO 044 to open trust supervision action in probate:

Similarly, the proposed order contains language that makes requirements only until plaintiff’s 18th birthday (such as the duty to file accountings with the court (see p. 8, para. 6) which are improper as discussed above.

 

Finally, the proposed order contains terms granting all Additional Requests for Relief (Order pdf at p. 8.)  The Petitioner is to confirm all those requests are in fact granted by the Court at the hearing, and if not, the referenced language granting all those additional requests for relief will need to be stricken or modified.