It’s not unusual for someone preparing his or her estate plan to at least think about including some guidance and direction to their heirs. That may be an admirable impulse, but it can be problematic if it goes too far.

When Silvia Villareal seemingly aimed to use the terms of her trust to micro-manage the behavior of her three adult children, her heirs asked the California Court of Appeal to step in (Godoy v Linzner.)

Silvia created a revocable living trust in 2005, naming as beneficiaries her three children: Leticia Linzer, Arturo Villareal, and Sonia Godoy. Upon her death, each of the three was to receive a one-third ownership of Silvia’s long-time home in Cerritos.

In 2018 Silvia restated her trust with the help of an attorney. The restatement declared that the trust had two purposes: to support Silvia while she was alive, and after her death to provide for the distribution of the trust property to her children or their issue. The three siblings were each to receive an equal share in the home, as tenants in common.

Silvia requested that “the children retain this real property for a minimum of five years after the date of [her] death,” suggesting that they “could also consider selling/buying the property to/from a sibling or to one or more of [her] grandchildren.” The document emphasized that these “requests and suggestions” were “precatory (expressing a wish) and not mandatory.”

The following year, this time without the assistance of an attorney, Silvia again amended her trust instrument with a handwritten document she drafted.

It stated that Silvia “would like to add the following” language to her “will/living trust”: “With the intention of leaving my house to my kids (Sonia, Arturo, and Leticia) which I worked all my life for, my legacy [and] my wish, is to keep the house as a place for all three of my children to enjoy, live and prosper and not to be sold or given outside of a [sic] family.”

She then included four clauses that read in full as follows:

“(A) Should any one of my children … upon my death or in the future wish to sell their portion they must to [sic] offer it for 100,000 (one hundred thousand doll.) to each other.

“(B) They must be flexible in received [sic] the purchase if it takes one to ten years (1-10 years).

“(C) If the sibling chooses to split the payments of the property 50% and 50% it is equal shares, it is my wish to do so.

“(D) My wish is for this home to be in the family, no outsiders. No dispute or adversary behavior among my children take place. Therefore, no contesting of my will/trust and this document. It is a gift.”

Silvia died in November of 2020, and Leticia became trustee. A probate referee valued the family home at just over $1 million at the time of her death.

In September of 2021, Arturo and Sonia asked the probate court to determine whether Silvia’s “wishes” as stated in her 2019 handwritten amendment were precatory or mandatory.

If they were mandatory, Arturo and Sonia asked the probate court to modify Silvia’s trust by striking the 2019 amendment, arguing that it unlawfully imposed an unreasonable restraint on alienation – that is, it would excessively restrict the ability of the property’s owners to sell or transfer the home.

They also asked the court to order Leticia, as trustee, to sell the home on the open market and distribute the proceeds equally among the heirs.

Leticia objected to her siblings’ requests. She argued that the 2019 amendment did not impose an unreasonable restraint on alienation, and that the state law barring excessive restrictions on sales of property does not apply to testamentary gifts of real estate.

She also asserted that Silvia’s 2019 handwritten amendment created a new testamentary trust that could lawfully limit the siblings’ ability to sell their interests in the home.

The probate court determined that Silvia’s wishes in the 2019 amendment were mandatory, not precatory, and that the statute barring unreasonable restraints on alienation does apply to real property transferred to heirs.

The court ruled that because the amendment imposed unreasonable restraints on the sale of the home (by then valued at $1.3 million), the amendment was void and the 2018 restatement was the operative trust document. The court, however, put the siblings’ request to compel Leticia to sell the property and distribute the proceeds off to a later date.

Leticia appealed, making the same arguments to the appellate court that she had made at trial.

In denying Leticia’s request to uphold the terms of Silvia’s handwritten amendment, the appellate justices said that public policy supports the ability of owners to sell their property as and when they wish:

“Free alienability fosters productive use of real property in society, provides a balance between the satisfaction of the desires of the present and future generations to tie up property, and promotes greater control of property by living members of society as opposed to excessive ‘dead hand control.’”

The justices further rejected Leticia’s argument that Silvia effectively created a new trust when she drafted her 2019 amendment because Silvia had not only failed to comply with the procedures for doing so set forth in California law but also the procedure for doing so set forth in her own trust.

The siblings had a right to sell the property they inherited, and Silvia’s attempts to restrict these rights were impermissible, the justices ruled. They affirmed the order issued by the probate court and awarded Arturo and Sonia their costs on appeal.

By Lynda I. Chung