Giraldin v. Giraldin

I. FACTUAL AND PROCEDURAL HISTORY

Because neither party petitioned for rehearing, we take most of these facts from the Court of Appeal‟s opinion. (See Cal. Rules of Court, rule 8.500(c)(2).) William Giraldin and Mary Giraldin were married in 1959. When they married, William had four children and Mary had three.2 William adopted Mary‟s children. Together, they had twin sons, Timothy and Patrick. William was a successful businessman and investor and accumulated a substantial fortune. In February 2002, William created the revocable trust at issue, the William A. Giraldin Trust (the trust), and made Timothy the trustee. William was the sole beneficiary during his lifetime. The remainder beneficiaries were Mary, who was entitled to the benefits of the trust during her lifetime, and then the nine children, who would share equally in what remained after both William and Mary were deceased. William reserved to himself specified rights, including the rights to amend or revoke the trust, to add or remove property from the trust, to remove the trustee, and to direct and approve the trustee‟s actions, including any investment decisions. The trust document provided that William could exercise…

As a means of transferring property at death, a person (the settlor) may place assets into a trust for the benefit of another (the beneficiary), reserve the right to withdraw the trust assets at any time, and appoint a third party (the trustee) to administer the trust. Such a trust is generally known as a “revocable trust.” (Black’s Law Dict. (9th ed. 2009) pp. 1647, 1654.) During the settlor’s lifetime, the trustee owes the settlor a fiduciary duty to properly administer the trust assets. (Bogert, The Law of Trusts and Trustees (3d ed. 2010) § 964, pp. 97-98.) For a breach of that duty, the settlor can sue the trustee. After the settlor’s death, can the beneficiaries sue the trustee on the deceased settlor’s behalf? According to the majority, they can. I disagree. In my view, only the estate’s personal representative (or, if none exists, the decedent’s successor in interest) can sue on the deceased settlor’s behalf. Therefore, unlike the majority, I would affirm the judgment of the Court of Appeal, which held that the trust beneficiaries here lacked standing to sue the trustee.

I

In 2002, William Giraldin created a revocable trust, designating his son Timothy as trustee. After…

A revocable trust is a trust that the person who creates it, generally called the settlor, 1 can revoke during the person’s lifetime. The beneficiaries’ interest in the trust is contingent only, and the settlor can eliminate that interest at any time. When the trastee of a revocable trust is someone other than the settlor, that trustee owes a fiduciary duty to the settlor, not to the beneficiaries, as long as the settlor is alive. During that time, the trustee needs to account to the settlor only and not also to the beneficiaries. When the settlor dies, the trust becomes irrevocable, and the beneficiaries’ interest in the trust vests. We must decide whether, after the settlor dies, the beneficiaries have standing to sue the trustee for breach of the fiduciary duty committed while the settlor was alive and the trust was still revocable.

Because a trustee’s breach of the fiduciary duty owed to the settlor can substantially harm the beneficiaries by reducing the trust’s value against the settlor’s wishes, we conclude the beneficiaries do have standing to sue for a breach of that duty after the settlor has died. We reverse the judgment of the Court of Appeal, which concluded…