Heaps v. Heaps

124 Cal.App.4th 286 (2004)

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Nature of the Case

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Facts

In 1985, George and Barbara executed a revocable living trust with both spouses acting as their own trustees. The trust would become irrevocable with the death of one of the original trustors. Upon that death, the trust was to be split into two trusts: a “family” trust consisting of the maximum amount of assets that would pass to the “estate of the Trustor” free of estate tax and a “marital” trust for the remainder. George and Barbara's son William (D) and son-in-law Frank Ciotti would join the survivor as co-trustees of the family trust, but the surviving spouse would remain sole trustee of the marital trust. The trust also provided that the surviving spouse would have the right to an annual principal invasion of the assets of the family trust, up to the greater of 5 percent of the assets or $5,000. However, to make that invasion, the trust (section 3.06 to be specific) required the surviving spouse to first “make such request on or before December 1 of each year only.” Title to the Circle Haven property was transferred to the trust via quitclaim deed in 1985. The quitclaim deed transferring the property to the trust was, however, never recorded. It was just given to George and Barbara's attorney. Barbara died in 1994. Four years before her death in 1990, George and Barbara sold the Circle Haven property for $ 320,000. George and Barbara got back a note and an all-inclusive deed of trust in the amount of $236,000, title to which was taken as joint tenants. The buyers of the Circle Haven property would have no reason to expect to receive title from the trust as the quitclaim deed was never recorded. As far as the buyers were concerned, title was directly in the names of George and Barbara as joint tenants. On Barbara's death, the trust became irrevocable. George married P just a few months after Barbara died. In 1996, George and his second wife P created their own family trust, and executed a quitclaim deed to transfer any interest in the Circle Haven property and in the all-inclusive trust deed received in return for that property to that new trust. After George died in 2002, during the pendency of this case, P transferred all the assets from the 1996 trust to her own revocable trust. The trial court ruled that P converted the property and must convey it to Ds. P appealed.