Providing for your children is one of the primary purposes of estate planning, but what happens to your carefully crafted trust if you had children you did not know about when you created the trust? Or, what if you have children after you create your trust but never get around to amending the trust to include them? In the trust and estate world, these children are often referred to as “omitted heirs.”
While Probate Code sections 21620-21623 generally provide answers to these questions, how they apply in real life is not always clear. Thankfully, the California Court of Appeal recently provided a real world example of how these rules work in Rallo v. O’Brian (2020) ___ Cal.App.5th ___. The case involved the trust of Hugh O’Brian, an actor famous for playing Wyatt Earp in the television series The Life and Legend of Wyatt Earp, which ran from 1955-1961.
In short, the court explained that a child born before the creation of a trust has the burden of proving he or she was left out of the trust “solely” because his or her parent “believed the child to be dead or was unaware of the birth of the child.” Omitted heirs who can prove such facts get an intestate share, i.e., a share equal in value to what they would have received if their parents had not made any trust.
If the omitted heir was born after their parents created a trust, then the situation is flipped – he or she is automatically entitled to receive a share of the trust unless someone else proves the parents intended to omit the after-born child.
In addition, the Court of Appeal confirmed in an unpublished portion of their opinion that probate petitions can be subject to demurrer, which in California is akin to a motion to dismiss.
Hugh O’Brian’s Children and the Trust
Hugh O’Brian, who reportedly did not marry until he reached the age of 81, was alleged to have had a number of children in the 1960s, some he knew about and some he did not. O’Brian’s children included Kimberly Rallo, Adam Ross and James Venverloh who would eventually be the petitioners in Rallo v. O’Brian case.
In 1992, O’Brian created the Hugh O’Brian Trust, which stated in part that “I have no children, living or deceased. I am intentionally not providing for Hugh Donald Etkes . . . Adina Etkes, James E. Venverloh, Betty Dean, any of their descendants and any other person who claims to be a descendant or heir of mine under any circumstances and without regard to the nature of any evidence which may indicate status as a descendant or heir.” Another paragraph of the Trust repeated that the previously named children were intentionally omitted, as well as “any of my heirs who may be living at the date of my death.”
O’Brian passed away in 2016, leaving specific gifts to 20 or so friends and family members, with the residue of the Trust assets to be allocated to the O’Brian Charitable Foundation after the death of his wife.
Three Omitted Heirs File Petitions Which Are Then Dismissed
After his passing, three of O’Brian’s purported heirs, Kimberly Rallo, Adam Ross and James Venverloh, filed petitions in Los Angeles County Superior Court alleging they were the biological children of O’Brian, and that O’Brian only omitted them as beneficiaries because he was unaware of their existence when he created the Trust. In response, the trustee of the Trust demurred to the petitions on the grounds that they failed to state a claim for relief, which the trial court sustained with leave to amend.
The omitted heirs then filed amended petitions and the trustee again demurred. As with the first demurrer, the trial court again agreed with the Trustee and dismissed the petitions on the grounds that they had failed to allege facts sufficient to show the omitted heirs were entitled to receive trust assets under Probate Code section 21622. Importantly, the trial court granted the second demurrer without leave to amend, effectively ending the case.
The Court of Appeal Affirms the Trial Court’s Ruling
Rallo and Ross appealed the dismissal of their petitions, arguing that the Trust’s general disinheritance clause did not preclude them from recovering under section 21622 and that they had adequately alleged facts showing O’Brian omitted them from the Trust solely because he was unaware of their births.
In analyzing whether the trial court’s decision was correct, the Court of Appeal first explained that the Probate Code treats omitted heirs born before a trust is created differently from heirs born after the creation of the trust. Namely, there is a presumption that heirs born before a trust is created were omitted on purpose. Thus, the burden is on the omitted heir who was born before the creation of a trust to prove that the sole reason he or she was not included in the trust was because his or her parents did not know he or she was alive. For heirs born after the creation of the trust, the burden is on the person opposing the heir’s receipt of trust assets to show the parents intended to omit the child.
In this matter, the petitioners were all born before the creation of the trust and therefore it was their burden to show O’Brian omitted them solely because he did not know they existed.
On appeal, Rallo and Ross argued that a general disinheritance clause could only defeat a claim brought by an heir born after the creation of a trust. The Court of Appeal rejected this, explaining that the plain language of Probate Code sections 21620-21622 did not bear any indication that the Legislature intended this result. While the section relating to heirs born after the creation of a trust does state in part that one way to prove a parent intended to disinherit an heir is through a general disinheritance provision, the Court of Appeal stated that this did not mean a general disinheritance provision had no effect on heirs born before the creation of the trust.
According to the Court of Appeal, nothing in the Probate Code prevents a parent from expressing his or her intent to disinherit a potential heir, even if those heirs are unknown to the parent at the time. As a matter of logic, if parent’s testamentary documents show he or she intended to exclude potential children, even those whose identities are unknown, then parent could not have failed to provide for those potential children solely because parent was unaware of those children’s existence.
The Court of Appeal also held that Rallo and Ross had failed to allege facts sufficient to show that O’Brian omitted them solely because he was not aware of them. Ross argued that to survive demurrer, all he had to allege was that he was unknown to O’Brian and that O’Brian would have treated him differently if he had been aware of him. The Court of Appeal disagreed, stating that Ross was required to allege facts sufficient to show that the only reason O’Brian omitted Ross was because he was not aware of Ross’ existence.
Upon establishing this standard, the Court of Appeal explained in an unpublished section of the opinion that Ross’ conclusory allegation that O’Brian only omitted him because O’Brian did not know Ross existed was insufficient to survive demurrer. Further, the Court of Appeal agreed with the trial court that based on the facts of the case there was no way that Ross or Rollo could amend their petitions to include evidence establishing this element, and therefore dismissal without leave to amend was appropriate.
Finally, in an unpublished portion of the opinion, the Court of Appeal confirmed that an interested party may file a demurrer in response to a probate petition. The Court of Appeal pointed out that the Code of Civil Procedure applies to probate proceedings except where the Probate Code provides applicable rules. Probate Code section 1043 allows interested parties to object to a petition and Code of Civil Procedure section 430.10 establishes that a demurrer is a form of objection. The Court of Appeal noted that the Probate Code does not prohibit demurrers and that demurrers have been considered in numerous probate proceedings.
What’s the takeaway?
Omitted heirs born before the creation of a trust face an uphill battle in proving that the sole reason they were excluded from the trust was because their parents did not know of their existence. This is especially true when the creator of the trust includes a general disinheritance clause.
Had O’Brian written a statement that he would have included Ross and Rollo as trust beneficiaries had he known of them when he created his trust, they would have been in a good position to establish their entitlement as “omitted heirs.” Of course, he almost just as easily could have amended his trust to add them as beneficiaries.