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Trusts and Estates

Han v. Hallberg, Jr.

Cite as B268380
Filed May 21, 2019
California Court of Appeal, Second District

By Golnaz Yazdchi
Sheppard Mullin Richter & Hampton LLP
https://www.sheppardmullin.com

Headnote:  Partnerships – Trust as Partner

Summary:  A living trust may be considered a “person” for purposes of a partnership, and may associate in a partnership in place of an individual.

Case Brief:

Four dentists formed a partnership to acquire and maintain a dental office building in 1975.  One of the then-partners, Dr. Hallberg, later assigned his interest in the partnership to his living trust.  Dr. Hallberg, as the trustee of the trust, substituted as a general partner.  After Dr. Hallberg’s death, the three other partners sought to enforce certain buyout provisions under the partnership agreement that were triggered upon the death of a partner.  The successor trustee of the trust (Dr. Hallberg’s son) argued that Dr. Hallberg was no longer a partner in his individual capacity at the time of his death, rendering the buyout provisions inapplicable.  The trial court disagreed and found in favor of the other partners, concluding that the trust was not a separate legal entity, and that Dr. Hallberg was indeed a partner at the time of his death. 

The Court of Appeal reversed.  Dr. Hallberg was not a partner when he died because he transferred his interest in the partnership to his trust, making the trust the partner.  Although a trust must act by and through its trustee, a trust is considered a “person” for purposes of partnership agreements, and may associate as a partner in place of an individual.  Thus, Dr. Hallberg’s death did not trigger the buy-out provisions.

https://www.courts.ca.gov/opinions/documents/B268380.PDF

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