The California Court of Appeal ruled that a trial court misinterpreted a family trust’s equalization provision when it treated decades of rental income and property sale proceeds as early distributions to two beneficiaries, holding that, by its plain terms, the provision reached only unpaid loans and unequal gifts. Sandford v. Sandford, Nos. G064699, G065223 (Cal. Ct. App. Sept. 2, 2026).
In 1998, Jean Sandford established a trust providing for equal distributions among her adult children, naming three of them as successor trustees. In 2000, she restated her trust to name all five of her children as successor trustees; the restated trust, which included an equalization provision permitting the trustee to reduce a beneficiary’s share for any gift or outstanding loan, is the operative document in this dispute. The children became trustees after Jean was declared incompetent in 2009. Two of the trustees, Michael and Mark, had managed several of Jean’s rental properties for many years; they had been involved in transactions that led to disputes among the siblings, including disagreements involving quitclaim deeds that the siblings had signed over to Jean in the 1990s and a property sale in which Michael had forged Jean’s signature on a power of attorney and misrepresented that sale proceeds had been reinvested through a tax-deferred exchange when, in reality, he had distributed the proceeds to Mark. Jean died in 2014.
In 2018, two siblings, Debra and Linda, petitioned the probate court for instructions, an accounting, and removal of Michael and Mark as trustees, alleging financial elder abuse and breach of fiduciary duty. The trial court ruled that the elder abuse and breach of fiduciary duty claims were time-barred, but it nonetheless invoked the equalization provision to conduct a 20-year audit of the family’s informal financial dealings. The court appointed a new trustee and ordered the trustee to distribute the trust property, ruling that rental and sale proceeds from several properties, in addition to outstanding loans, be deemed early distributions to Michael and Mark, thereby substantially reducing their shares of the trust. The court also awarded attorney’s fees against them. Michael and Mark appealed.
The Court of Appeal agreed that the trustee could offset a beneficiary’s share for outstanding loans, including loans for which the statute of limitations had run, because the trust’s plain language reflected Jean’s intent to equalize such advances regardless of their enforceability. The court found no comparable textual basis, however, for extending the provision to rental and sale proceeds, which involved property transactions rather than loans or gifts. If Michael or Mark had breached fiduciary duties in handling those transactions, the trustee’s remedy would have been a cause of action for breach of fiduciary duty or elder abuse, and the trial court had already found those claims time-barred. The trial court could not indirectly achieve, through a strained reading of the equalization provision, what direct causes of action could no longer accomplish.
The court affirmed the trial court’s denial of a petition by Mark to quiet title to a property the siblings had quitclaimed to Jean in the 1990s, holding that Mark had not presented evidence compelling a finding by clear and convincing evidence that a deed from him to Jean conveyed bare legal title without the underlying beneficial interest. In addition, because the court substantially altered the trial court’s judgment by reversing the equalization orders concerning rental and sale proceeds, it also reversed the trial court’s award of attorney’s fees so that the award could be reconsidered in light of the parties’ revised relative success.
The Court of Appeal reversed the trial court’s orders equalizing the rental and sale proceeds and its attorney’s fee award, affirmed the judgment in all other respects, including the orders equalizing outstanding loans and the denial of the quiet title petition, and remanded for further proceedings.
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