Two months before his death in 1997, William Walker Reynolds, Jr., executed a general power of attorney designating his daughter, Cynthia Reynolds, as his attorney-in-fact. The power expressly authorized the attorney-in-fact to create a trust but did not authorize the changing of beneficiaries. The day before her father died, Ms. Reynolds created an inter vivos trust in his name. The trust provided that Mr. Reynolds' residence was to be held in trust for Ms. Reynolds for life, with the remainder going to Mr. Reynolds' grandchildren, effectively bypassing Mr. Reynolds' three other children. The trust also provided that the rest of Mr. Reynolds' property was to be divided in equal shares among his four children, but this was cold comfort to the other children because the residence was allegedly the sole asset of the trust.
One of the children, Karen Schubert (later joined by the others), filed a complaint contending that Mr. Reynolds had prepared a 1988 will that divided his property equally among his four children, and that a petition for probate of that will had been filed. Mrs. Schubert also stated that in the absence of the will the property would pass in equal shares to the four children under the laws of intestate succession. She pointed to California's Probate Code at section 4264(f), which prohibits an attorney-in-fact from changing a beneficiary designation unless expressly authorized under the power of attorney. After the trial court ruled the trust invalid, Ms. Reynolds appealed, arguing that Probate Code section 4264(a) permits an attorney-in-fact to create a trust when the power of attorney expressly authorizes its creation. Since a trust must necessarily have beneficiaries, she reasoned, the power to create a trust must include the power to designate beneficiaries.
The California Court of Appeal rejects Ms. Reynolds' reasoning. The court harmonizes the two conflicting provisions of the Probate Code by determining that an attorney-in-fact's power to designate particular trust beneficiaries is limited. 'The principal could be named as a beneficiary, without violating the proscriptions of subdivision (f),' the court writes. 'Arguably, in a given case other beneficiaries could be named consistent with the principal's existing estate plan or the laws of intestate succession, provided that doing so did not effectuate a change in 'the designation of beneficiaries to receive any property . . . on the principal's death . . .' ' [Emphasis in original]
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