Estate of Morra

Filed 2/15/08 Estate of Morra CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

John Morra, the son of Louis Morra, deceased, appeals from a judgment and order rejecting his contention that Louiss property should be distributed pursuant to the laws of intestacy, and ruling that any residue of Louiss probate estate should be distributed to the trustee of the Louis and Bobbye T. Morra Revocable Living Trust (the Trust). We affirm.

Background

In January 2000, Louis and Bobbye Morra instituted an estate plan that, as relevant here, included the disposition of three parcels of real property: Ocie Way, Redbud Lane and Soda Bay Road. At that time, both Redbud Lane and Ocie Way were Bobbyes separate property. Soda Bay Road had been purchased during the parties marriage and was held by them in joint tenancy. As part of their estate plan, the Morras executed a property characterization agreement, confirming all three properties as community property. They established the Trust, listing all three properties as trust assets. They executed reciprocal pourover wills that, in Paragraph Fourth, provided that upon the death of the testator, the residue of the testators estate was to be added to, administered, and distributed as a part of the trust according to the terms of the trust and any amendment made to it before [the testators] death. The Trust, in Article 6, provided that upon the death of the surviving spouse, Redbud Lane was to be distributed to Bobbyes daughter, Kim Jaye Rhuland. The balance of the remaining trust estate was then to be divided into two equal shares. One share was to be distributed to Kim Jaye Rhuland and the other share was to be distributed in equal shares to Louiss children, John Lawrence Morra, Jacqueline Morra and Jerilynn Morra. In Article 3, the Trust reserved to both spouses the power to revoke any trust created by this instrument as to any separate and quasi-community property of that [spouse] and any community property. It also provided, After the death of the deceased settler, the surviving settlor may at any time amend, revoke, or terminate, in whole or in part, any trust created by this instrument.

Louis died on August 26, 2001. After his death, Bobbye exercised her right under Article 3 to revoke the Trust, executing a new revocable living trust that provided the entire estate would go to her daughter, Kim Jaye Rhuland. John Morra petitioned to probate Louiss will. Bobbye objected, asserting that all of Louiss assets had become the property of the Trust, of which she was the sole beneficiary, and those assets therefore were subject to distribution under her new living trust. The probate court, relying on Estate of Powell (2000) 83 Cal.App.4th 1434 (Powell), found that upon Louiss death, his community property share of the trust property became his separate property so that Bobbye lacked any power or authority to revoke the trust as to that property. The court entered judgment that [Louiss] one-half of the community property share is to be distributed pursuant to his valid will or intestate, whichever the case may be. Bobbye appealed from an order denying her motion for reconsideration of the courts ruling. By unpublished opinion, we dismissed the appeal because Bobbyes motion for reconsideration had failed to raise new or different facts. (Estate of Morra (Nov. 1, 2005, A109125) [nonpub. opn.].)

John Morra then petitioned to have Louiss property distributed by intestate succession. His position was and is that by exercising her right to revoke the Trust, Bobbye effectively terminated the Trust so that under the terms of Louiss will there was no trust into which the residue of his estate might be distributed. The trial court held that under Powell, supra, 83 Cal.App.4th 1434, Bobbyes attempted revocation of the Trust effectively removed her community property from the Trust, but did not terminate the Trust as to Louiss property interests, which then, by reason of the Trust Instrument and the pourover will, would be administered and distributed by the Trust.

Discussion

In Powell, Myrtle and William Powell placed their community property in a trust that contemplated that after the death of both spouses the property would be distributed to Myrtles son from a previous marriage. (Powell, supra, 83 Cal.App.4th at pp. 1437-1438.) Myrtle also executed a will leaving all of her property to the trustee of the trust,  to be held, managed, and distributed in accordance with the provisions contained therein.  (Id. at p. 1438.) The trust document provided either party might revoke the trust  at any time during the lifetime of either Trustor. . . .  (Ibid., italics in original.) Myrtle died, and approximately one year later, William executed a notice of revocation. The court found that by allowing eitherparty to revoke the trust at any time, the trust contemplated revocation by the surviving spouse. That right, however, was further defined and limited by several code provisions. Probate Code section 15401, subdivision (b) provides, Unless otherwise provided in the instrument, if a trust is created by more than one settlor, each settlor may revoke the trust as to the portion of the trust contributed by that settlor, except as provided in Section 761 of the Family Code. Family Code section 761, subdivision (b) provides, Unless the trust instrument expressly provides otherwise, a power to revoke as to community property may be exercised by either spouse acting alone. The Powell court found these provisions must be interpreted to cover the entire trust corpus rather than just the revoking trustors share. (Powell, supra, 83 Cal.App.4that p. 1441.) However, at the time of Myrtles death, Probate Code section 100 provided (as it still provides, in subdivision (a)), Upon the death of a married person, one-half of the community property belongs to the surviving spouse and the other half belongs to the decedent. The court therefore found, to the extent William and Myrtle retained reversionary property interests in the trust assets during Myrtles lifetime by virtue of the right of revocation provided in the trust, those property interests were transmuted from community to separate property upon Myrtles death. Under Probate Code section 15401, subdivision (b), Williams revocation was therefore effective only as to his half of the trust corpus . . . . Myrtles one-half was subject to disposition as provided in her will, i.e., in accordance with the provisions of the 1991 trust. (Powell, at p. 1441.)

As the trial court found here, under Powell, supra, 83 Cal.App.4th 1434, the community property in the Trustmade up of the three properties in questionbecame separate property upon Louiss death. Bobbyes revocation of the Trust, like Williams revocation of the trust in Powell, therefore was effective only as to her separate one-half property interest. Louiss one-half interest in the property continues to be a part of the Trust and is subject to distribution in accordance with the trust instrument. Louiss will requires any residual property in Louiss probate estate to be added to, administered, and distributed in accordance with the unrevoked portions of the Trust. As the Trust continues to exist, the property subject to it, including the residue of the probate estate, is to be distributed in accordance with the unrevoked portions of the trust, not by intestate succession.

John Morra cites Estate of Coleman (2005) 129 Cal.App.4th 380 (Coleman). In that case, Thomas and Jean Coleman established a revocable trust. Thomass will also provided the residue of his estate, if any, was to go into the trust and to be held, administered and distributed under the terms of the trust instrument. (Id. at pp. 383-384.) Thomas and Jean later divorced and divided the trust properties as a part of a marital settlement agreement. (Id. at p. 384.) The court found that where, as in the case before it, a trust reserves to a settlor the power to withdraw trust property from the trust, and the settlor withdraws it, the withdrawal terminates the trust as to the property withdrawn. In addition, [w]here the property of the trust ceases to exist, there is nothing to which the trustee may hold legal title, nothing in which the beneficiaries may hold a beneficial interest, and there is no longer a trust. [Citation.] It follows that the complete withdrawal of the trust property terminates the entire trust. (Id. at p. 388.) As Thomas and Jean had withdrawn all of the trust property, the trust was revoked in its entirety prior to Thomass death. The court also held, however, that the pourover provision in Thomass will had the effect of establishing a testamentary trust, the terms of which were identical to those in the revoked living trust. (Id. at p. 388.) By reason of Probate Code section 6122, the parties divorce affected those terms, so that Thomass property was to be administered and distributed as though Jean had predeceased him, with the result that it was to be divided equally between his three daughters. (Id. at p. 389.)

Coleman, supra, 129 Cal.App.4th 380 has no effect on the present case. At the time of Louiss death, unlike the situation in Coleman, the trust properties were still in the Trust. As discussed previously, Bobbyes revocation affected only her one-half interest in the trust properties. Louiss one-half interest remained in the Trust, and the Trust, therefore, continued to exist despite Bobbyes revocation. It is of no matter that the terms of Louiss will differ from the terms of the wills in Coleman or Powell, supra, 83 Cal.App.4th 1434, and might not have required that a new testamentary trust be established if the Trust had been completely revoked prior to Louiss death. The Trust existed as of Louiss death and continues to exist despite Bobbyes purported revocation. Louiss property, therefore, must be administered in accordance with the trust instrument and does not pass intestate.

Conclusion

The judgment and order is affirmed.

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STEIN, J.

We concur:

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MARCHIANO, P. J.

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MARGULIES, J.

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