MCLE SELF-STUDY ARTICLE SETTLOR INCAPACITY AND FILLING A TRUST’S "EMPTY CHAIRS"

Written by Jeremy J. Ofseyer, Esq.^*

I. SYNOPSIS

Recent amendments to Probate Code sections 15800 and 16069, adopting Assembly Bill No. 1079 (Stats. 2021, ch. 749) effective January 1, 2022, change the duties of trustees to disclose information to beneficiaries upon the incompetence of a trust’s settlor. These are some of the most significant recent changes to California trust law. These reforms address the so-called "empty chair problem," where the settlor, who typically holds the power of trust revocation, is incompetent and, thus, leaves empty the "chair" of the person to whom the trustee’s duties flow. The new provisions aim to limit the class of beneficiaries who fill this "chair" and are thus entitled to certain trust information under the Probate Code, including a copy of the terms of the trust upon request,⁰¹ information related to the administration upon reasonable request,⁰² and annual and other trust accountings.⁰³

This article analyzes these modifications to the Probate Code, and the interpretation and determination of competence or incompetence under these Code sections, focusing on how these sections require certain Trustee disclosures in the event of a settlor’s incompetence, without mandating assessment of competence (or incompetence) or reliance on any particular type of proof of incompetence. Part II provides background on the legal status of the settlor’s "empty chair" prior to 2022. Part III is an overview of amended Probate Code sections 15800 and 16069. Part IV analyzes the sometimes underappreciated distinction between "competence" (or "legal capacity") and "capacity." Part V analyzes interpretive and practical challenges raised by combining mandatory disclosure in the event of settlor incompetency, without mandating competence assessments or reliance on any particular type or degree of proof of incompetence. Part VI discusses possible "authorized revokers" besides the trust’s settlor. Part VII discusses the related issue of the "empty chair" of the trusteeship, when the settlor/initial trustee is incompetent. Part VIII discusses possible reforms to Probate Code section 15800 to address some of the challenges it poses. Part IX considers related trust drafting considerations.