An heir may not like the terms of his or her inheritance, but as one unhappy son learned, what really matters in court is the clear intent of the person making the gift.

That was underscored in a recent decision by the California Court of Appeals (Sachs v. Sachs.)

David Sachs set up a trust in 1980, specifying that on his death, aside from a few small gifts, most of the assets held in the trust would be distributed equally to his two children, Benita and Avram.

In 1989 David began keeping track of money he distributed to the two adult children, on papers he referred to as the “Permanent Record.” When either child asked for money, David would remind them that the distribution would be reflect on the Permanent Record.

Following a stroke in 2013, David had cognitive problems and hired a bookkeeper. He instructed her when to make distributions to Benita and Avram, and “was adamant that she keep a record of the distributions,” the appellate court noted.

He told his bookkeeper on several occasions that the list was important so payments made to his children could be deducted from their respective inheritances. After each distribution was made, David would confirm with the bookkeeper that she had recorded it on spreadsheets she created for the purpose.

Later in 2013 David resigned as trustee and was succeeded by Benita. The following year the bookkeeper advised Benita and Avram that expenditures for David’s care and payments to the children were rapidly depleting the trust.

Avram continued to ask Benita for distributions, resulting in friction between the two when she resisted his requests. In several emails, Avram sought to assure Benita by stating that the distributions would go on his record.

In October of 2015, Benita learned that Avram was contending that the Permanent Record did not exist or that he was not bound by it. David’s mental condition had deteriorated by then to the point that he could not be asked about his intention in creating the Permanent Record.

Following David’s death, Benita asked the Santa Barbara County probate court for instructions about how to distribute the assets from the trust. She argued that, because Avram had received over $450,000 more than Benita in lifetime distributions, his share of the trust should be reduced to equalize the proceeds to each.

The probate court granted her request. Avram appealed.

The appellate court noted that California law provides that distributions during a transferor’s lifetime can be treated as part of an at-death transfer if one of three conditions are met:

1,)  The trust document provides for deduction of lifetime gifts from the at-death transfer;

2.)  The transferor declares in a “contemporaneous writing” that the gift is in satisfaction of the at-death transfer or is to be deducted from the value of the at-death transfer; or

3.)  The transferee acknowledges in writing that the gift is to be deducted.

There is no special form required for the transferor’s “writing,” the court noted, nor must it even be signed. David’s Permanent Record, written in his hand at various times, was an acceptable “writing.” In addition, the upper court said, its existence is “highly persuasive” of his intent, since it seems to have no purpose except to equalize distributions between his two children.

Avram argued that the statements in his emails that after receiving gifts that each “goes on my record” did not clearly constitute an acknowledgement that the gifts were to be deducted from his share of the estate. The appellate court disagreed, saying his words “can reasonably construed as an acknowledgement” that the distributions were advancements from his eventual inheritance.

The appellate justices upheld the probate court’s decision in favor of Benita, and awarded her costs on appeal.

By Lynda I. Chung