New York Estate Planning & Elder Law Blog
In an oral ruling last week a probate court judge ruled in favor of Shelly Sterling selling the Los Angeles Clippers against Donald Sterling’s objections. Judge Michael Levanas ruled in a probate Los Angeles Superior Court case that Shelley has the authority to sell the professional basketball team to businessman Steve Ballmer, who has agreed to purchase the team for $2 billion.
Appellate Proof Ruling
The judge’s ruling took the extraordinary step of granting Shelley’s request for an order under section 1310(b) of the California Probate Code. It states that the trial court can direct the powers of a fiduciary to exercise powers as though no appeal was pending. Under this provision, the sale of the Clippers could be completed regardless of an appellate court intervention on the part of Donald Sterling.
Donald Sterling’s Removal as Co-Trustee
One of the most significant parts of the ruling was that the judge stated that Shelley had her husband properly removed as a co-trustee of the family trust, which held the ownership of the Clippers, before she made the sale. According to sources, the Sterling family trust included a provision that if either Shelley or Donald was found by two qualified doctors to have “an inability to conduct affairs in a reasonable and normal manner” he or she could be removed as co-trustee. Shelley had Donald see two neurologists back in May for a competency test, and those doctors found that Donald was incompetent to manage the trust as co-trustee due to Alzheimer’s disease.
Removing a Trustee
Removing a trustee from a trust is usually a painful and lengthy process. Under the law, trustees are presumed to be competent in order to be able to perform their duties. Therefore, when beneficiaries or co-trustees want a trustee removed for incompetence they must prove to the court that the trustee is incapacitated to the point that he is unfit to serve in the position.
Most actions to remove trustees involve family members. Oftentimes, the trustee in question is a parent that is serving as trustee for their children’s trust or like in the case of the Sterlings one spouse is petitioning to remove the other. Litigation to remove a parent or spouse as trustee is costly, time consuming, and often comes at the expense of emotionally devastating a family.
How to Establish Incompetence
Because the court presumes competence for trustees there are only a few ways to prove that a trustee is unable to serve and incompetent for the position. Some trusts, like the Sterling family trust, come with instructions about how to prove incompetence or how to remove a person as trustee. If no such language exists, the beneficiaries or co-trustee must turn to case law. Typically, it involves a showing that the trustee is unable to resist fraud, undue influence, or duress. The other option is usually to show that the trustee is no longer able to provide himself with personal needs like food, clothing, and shelter without aid.
A final option in some states to remove a trustee is to deem him unfit to run the trust by a doctor or medical professional. The doctor must test the trustee and testify that medically he is unfit by reason of health problem or mentally incompetent to fulfill the duties as trustee. This, aided by language in the family trust document, was the route that Shelley took to have her husband ruled incompetent as co-trustee so that she could complete the sale of the Clippers.