Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County, Ct. No. A244237, Mary Fingal Schulte, Judge.
Murtaugh Meyer Nelson & Treglia and W. Rod Stern for Plaintiff and Appellant.
Law Offices of Norbert R. Bunt, Norbert R. Bunt; and Erika W. Senter for Objector and Respondent.
OPINION
FYBEL, J.
Introduction
In June 2006, Audrey Mitani tragically suffered an injury during childbirth that left her comatose. Audrey Mitani’s husband, Michael Takashi Mitani, raised their newborn daughter, Ashley Mitani. Michael succeeded in negotiating a favorable settlement of the family’s claims arising out of Audrey’s injuries. Michael retained an attorney to draft a special needs trust for Audrey, in order to preserve her eligibility for needs based government benefits. The special needs trust, upon petition by Michael, its trustee, was presented to and approved by the probate court. In April 2008, Audrey passed away.
To avoid confusion, we will refer to the Mitani family members by their first names; we intend no disrespect.
After Audrey’s death, Michael petitioned the probate court to modify the distribution provisions of the special needs trust to reflect what he and his attorney had discussed at the time the trust was drafted. The probate court denied the petition to modify the special needs trust.
Under the terms of the special needs trust approved by the probate court, the largest portion of the trust property is to be held in trust for Ashley, with discretionary payments to be made from income and principal as necessary for Ashley’s health, education, support, and maintenance. When Ashley reaches age 25, the trust property will be distributed to her outright.
The proposed modification would cause the portion of the special needs trust that would otherwise be held in trust for Ashley to be used for Michael’s health, education, support, and maintenance during his lifetime, and would be distributed outright to Ashley only upon Michael’s death. The proposed modification would substantially impair Ashley’s interests in the trust in two ways. First, the income and principal of the trust would be used for Michael’s benefit, not Ashley’s. Second, Ashley’s right to the trust corpus would be deferred from her 25th birthday to the date of Michael’s death. The probate court noted that it is “very unlikely” it would have approved the trust in the first instance if it had included the distribution provisions now proposed by Michael.
We conclude that the correct standard of review of the probate court’s order denying modification of the trust is abuse of discretion. The probate court did not abuse its discretion in denying Michael’s petition for modification, and we therefore affirm the probate court’s order.
Statement of Facts and Procedural History
While delivering her first child, Ashley, in June 2006, Audrey suffered irreversible brain damage, which left her in a coma until her death on April 5, 2008. Audrey died intestate.
In May 2007, settlements of separate claims arising out of Audrey’s injuries were reached. The claims of Michael and Ashley were settled for $250,000 each. Michael’s share was paid to him outright, and Ashley’s share was used to purchase an annuity for her, which was approved by the court in a minor’s compromise of disputed claim order.
Audrey’s claims were settled for $3.44 million. Audrey’s share was to be paid into a special needs trust created for her benefit. The court approved the creation and funding of the special needs trust on August 10, 2007. In February 2008, Michael petitioned the probate court for a modification of the trust due to a clerical error; Michael asked that the words “the deceased settlor” be changed to “the beneficiary” (referring to Audrey) in one paragraph of the trust document. The court granted the requested modification in July 2008.
On our own motion, we augment the record on appeal with the following documents, all of which were filed in Mitani v. Irvine Regional Hospital and Medical Center (Super. Ct. Orange County, 2010, No. A244237): (1) petition for order authorizing modification of special needs trust, filed February 27, 2008; (2) order authorizing first modification of special needs trust, filed July 10, 2008; and (3) minute order, filed October 20, 2008. (Cal. Rules of Court, rule 8.155(a)(1)(A).)
Michael filed a petition for an order authorizing a second modification of the special needs trust on June 12, 2008. Ashley, through Norbert R. Bunt, her court appointed guardian ad litem, opposed the petition. After a hearing, the probate court denied the petition. Michael timely appealed.
An order denying a petition to modify a trust is appealable. (Code Civ. Proc., § 904.1, subd. (a)(10); Prob. Code, §§ 1304, subd. (a), 17200, subd. (b)(13).)
Discussion
A. Standard of Review
The first question we must address is: What is the standard of review on appeal from the probate court’s denial of a petition to modify or reform an irrevocable special needs trust? In Conservatorship of Kane (2006) 137 Cal.App.4th 400, 405, the appellate court held that issues of law regarding the jurisdiction and authority of the probate court are reviewed de novo. The court also held, however, that “it is for the probate court, in the first instance, to exercise its discretion as to whether such a [special needs] trust should be created, based upon the facts placed in the record.” (Id. at p. 408, italics added.)
We hold the appropriate standard for reviewing the probate court’s order denying the petition for modification of the special needs trust is abuse of discretion. Our conclusion is consistent with Probate Code section 15403, subdivision (b), which gives the probate court discretion to modify or terminate an irrevocable trust under certain circumstances, and section 15409, subdivision (b), which provides that a restraint on transfer in the trust does not preclude the probate court “from exercising its discretion to modify or terminate the trust.”
The cases Michael cites in arguing the de novo standard of review should apply are inapposite. In Topanga and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775, 778, 779 780, the de novo standard applied when the appellate court was considering whether a nonparty to a contract, who was sued for breach of that contract, could recover attorney fees incurred on noncontract claims if the plaintiff filed a voluntary dismissal. The appellate court concluded, “[t]he issues presented by this appeal involve statutory and case law respecting an award of attorney fees” (id. at p. 779), and “[t]here are no relevant evidentiary disputes and the determination of the trial court did not require an exercise of discretion” (id. at p. 780). Here, the decision to modify the special needs trust did require the exercise of the probate court’s discretion. The second case relied on by Michael is Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 800, in which the Supreme Court concluded that whether a transaction is usurious is generally a mixed question of fact and law. Because the facts regarding the historical basis of the transaction were undisputed, the court applied the de novo standard of review to whether the debt restructuring was subject to the usury law. (Id. at p. 801.) There is no similarity of issues between this case and Ghirardo v. Antonioli,
B. Law Relating to Creation of the Special Needs Trust
Probate Code section 3604 “permits personal injury damages or settlement proceeds for a disabled minor or incompetent person to be delivered to a trustee of a special needs trust.” (Cal. Law Revision Com. com., 52B West’s Ann. Prob. Code (2009 ed.) foll. § 3604, p. 151.) Such a special needs trust “‘is intended to allow the beneficiary to continue to maintain eligibility for certain needs based government benefits, such as S.S.I. or Medi-Cal.’” (Shewry v. Arnold (2004) 125 Cal.App.4th 186, 194.) The statute reads, in relevant part, as follows: “(a)(1) If a court makes an order under Section 3602 or 3611 that money of a minor or person with a disability be paid to a special needs trust, the terms of the trust shall be reviewed and approved by the court and shall satisfy the requirements of this section. The trust is subject to continuing jurisdiction of the court, and is subject to court supervision to the extent determined by the court.... [¶]... [¶] (b) A special needs trust may be established and continued under this section only if the court determines all of the following: [¶] (1) That the minor or person with a disability has a disability that substantially impairs the individual’s ability to provide for the individual’s own care or custody and constitutes a substantial handicap. [¶] (2) That the minor or person with a disability is likely to have special needs that will not be met without the trust. [¶] (3) That money to be paid to the trust does not exceed the amount that appears reasonably necessary to meet the special needs of the minor or person with a disability.” (Prob. Code, § 3604, subds. (a), (b).)
The order approving the compromise of Audrey’s medical malpractice claim and establishing Audrey’s special needs trust includes findings by the probate court satisfying each of the elements of Probate Code section 3604, subdivision (b).
The special needs trust established for Audrey by the probate court’s order meets the requirements of federal law, which permits an individual to be eligible for Medicaid assistance despite the existence of “[a] trust containing the assets of an individual under age 65 who is disabled... and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title....” (42 U.S.C. § 1396p(d)(4)(A).)
C. Law Relating to Modification of the Special Needs Trust
The statutes covering special needs trusts (Prob. Code, § 3600 et seq.) do not include specific reference to modification. We therefore look to other provisions of the Probate Code dealing generally with modification of trusts. Subject to circumstances not relevant here, “if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court.” (Prob. Code, § 15403, subd. (a).) Because Ashley, through her court appointed guardian ad litem, objected to modification of the special needs trust, section 15403 does not apply.
Probate Code section 15404, subdivision (a) permits the settlor and all trust beneficiaries to petition for modification of the trust. As noted, ante, Ashley did not consent to modification, so this subdivision of section 15404, too, is inapplicable. Subdivision (b) of section 15404 provides: “If any beneficiary does not consent to the modification or termination of the trust, upon petition to the court, the other beneficiaries, with the consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the beneficiaries who do not consent are not substantially impaired.” Michael does not dispute in his appellate brief that the proposed modification would substantially impair Ashley’s interests; therefore, section 15404, subdivision (b) also does not apply.
The probate court also has the authority to modify the dispositive provisions of a trust “if, owing to circumstances not known to the settlor and not anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially impair the accomplishment of the purposes of the trust.” (Prob. Code, § 15409, subd. (a).) Nothing about the circumstances surrounding the special needs trust has changed. Indeed, the purpose of the trust-ensuring Audrey’s eligibility for government benefits during her lifetime-has been achieved. Therefore, section 15409, subdivision (a) of the Probate Code does not apply.
Finally, “[a]t common law, a trial court had the equitable power to reform an irrevocable trust where a drafting error defeats the trustor’s intentions. [Citations.] Ike [v. Doolittle (1998) 61 Cal.App.4th 51] confirms that this authority remains today. [Citation.]” (Bilafer v. Bilafer (2008) 161 Cal.App.4th 363, 369.) As will be explained, post, Michael did not and cannot show the settlor’s intentions have not been met.
In trust law, the terms “trustor” and “settlor” have the same meaning. “The settlor is the person creating the trust.... The settlor is sometimes but less often referred to as the trustor,” (13 Witkin, Summary of Cal. Law (10th ed. 2005) Trusts, § 25, p. 597.) Audrey’s special needs trust uses the term “settlor, ” which convention we follow in this opinion.
D. Proposed Modification to the Special Needs Trust
In relevant part, Audrey’s special needs trust currently reads as follows (after the first modification approved by the probate court): “4.10 Distribution of Balance Upon Death of Beneficiary. Unless terminated earlier, on the death of the beneficiary, the trustee shall first satisfy the payback requirements of paragraph 4.7 [regarding state claims for reimbursement for medical assistance paid on behalf of Audrey], and then divide the balance of the trust estate, including any additions made to it by reason of the beneficiary’s death, such as from the beneficiary’s estate or policies of life insurance on her life, into two shares, hereafter referred to as the Exempt Share and the Marital Deduction Share. [¶]... [¶]... The Marital Deduction Share shall be distributed outright to beneficiary’s spouse, Michael Takashi Mitani. [¶]... [¶]... The Exempt Share shall be held, administered, and distributed according to the terms of the Ashley Mariko Mitani Trust as set forth in paragraph 4.14.”
Paragraph 4.14 establishes the Ashley Mariko Mitani Trust as follows:
“... So long as the beneficiary’s daughter, Ashley Mariko Mitani is under the age of 25 years, the trust estate shall be held, administered, and distributed by the trustee for the benefit of Ashley Mariko Mitani (‘Ashley’), as follows:
“(a) Discretionary Payments. At any time or times during the trust term, the trustee shall pay to or apply for Ashley’s benefit so much of the net income and principal of the trust as the trustee deems proper to provide Ashley with the level of support necessary for her health, education, support and maintenance. In exercising discretion, the trustee shall give the consideration that the trustee deems proper to all other income and resources that are known to the trustee and that are readily available to Ashley for use for these purposes. All decisions of the trustee regarding payments under this subsection, if any, are within the trustee’s discretion and shall be final and incontestable by anyone. The trustee shall accumulate and add to principal any net income not distributed.
“(b) Distribution on Termination. The trust shall terminate on Ashley reaching the age of 25 years or on Ashley’s death, whichever occurs first. If the trust terminates on Ashley reaching the age of 25 years, the trustee shall distribute the trust property (including all income then accrued but uncollected and all net income then remaining in the hands of the trustee) to Ashley outright. If the trust terminates on Ashley’s death, the trustee shall distribute the trust property to Ashley’s then living issue in the manner provided in California Probate Code Section 246.
“(c) Final Disposition. If the trust property is not completely disposed of by the preceding provisions, the undisposed of portion shall be distributed outright to the heirs of Audrey Hikaru Mitani.”
The second modification proposed by Michael would change the terms of the special needs trust to read as follows: “4.10. Distribution of Balance Upon Death of Beneficiary. Upon the death of the beneficiary, the trustee shall first satisfy the payback requirements of paragraph 4.7, and then divide the balance of the trust estate, including any additions made to it by reason of the beneficiary’s death, such as from the beneficiary’s estate or policies of life insurance on her life, into two shares, hereafter referred to as the Exempt Share and the Marital Deduction Share. [¶]... [¶]... The Marital Deduction Share shall be distributed outright to the beneficiary’s spouse, Michael Takashi Mitani. [¶]... [¶]... The Exempt Share shall be held, administered, and distributed according to the terms of the Exemption Trust as set forth in paragraph 4.16.”
The proposed second modification would then add paragraph 4.16 to the special needs trust, reading as follows:
“4.16. Exemption Trust. During the lifetime of the beneficiary’s spouse, Michael Takashi Mitani, the trustee shall hold[, ] administer and distribute the assets of the Exemption Trust as follows:
“(a) Discretionary Distributions of Income. At any time or times, the trustee shall pay to or apply for the benefit of Michael Takashi Mitani so much of the net income of the trust, as the trustee deems proper to provide for Michael Takashi Mitani’s health, education, support and maintenance. The trustee shall accumulate and add to principal any net income not distributed.
“(b) Discretionary Distribution of Principal. At any time or times, the trustee shall pay to or apply for the benefit of Michael Takashi Mitani as the trustee deems proper to provide for Michael Takashi Mitani’s... health, education, support and maintenance.
“(c) No Right to Withdraw Principal. No one will have the right to withdraw principal from the Trust, other than the discretionary distributions pursuant to subsection (b).
“(d) Death of Michael Takashi Mitani. Upon the death of Michael Takashi Mitani, the assets then remaining in the Trust will be held, administered, and distributed pursuant to the terms of the Ashley Mariko Mitani Trust as set forth in paragraph 4.14.”
The change proposed by the second modification is that the portion of the special needs trust distributed to the exempt share will be used for the benefit of Michael, and distributed to Ashley only upon Michael’s death. Under the terms of the special needs trust as it is currently constituted, the exempt share will be used for Ashley’s benefit until she turns 25 years old, at which time it will be distributed to her outright.
The appellate record does not contain any admissible evidence of the amounts that would be allocated to the marital deduction and exempt shares under the current language of the special needs trust. The court’s order approving the compromise of Audrey’s medical malpractice action provided that the balance of the settlement funds, after expenses, would be $2,773,208.15. The order also notes that a Medi Cal lien (in an unknown amount) was to be paid from the proceeds of the settlement. Nothing in the record indicates how much, if any, money was expended for Audrey’s care before her death, or whether the trust has increased or decreased in value. In their filings in the probate court, the parties seem to agree that under the terms of the trust as currently written, the exempt share (at issue in this case) would be valued at approximately $2 million, while the marital deduction share would be valued at approximately $800,000.
In a supplement to his petition to modify the trust, Michael declared that, as of July 23, 2008, he had not received the distribution of the marital deduction share. Nothing in the appellate record indicates whether the marital deduction share has been received by Michael since that date.
It is undisputed that Michael and W. Rod Stern, the attorney retained to draft Audrey’s special needs trust, discussed structuring the trust so all assets would be available to Michael after Audrey’s death, with any remainder passing to Ashley only at Michael’s death. Stern admits he erred in not drafting the trust in accordance with his discussions with Michael, due to Stern’s grief at the recent loss of his mother to cancer.
E. Probate Court’s Order
The probate court’s minute order following the hearing on Michael’s petition for modification reads in relevant part as follows:
“The Petition by Michael Mitani requesting approval to modify the trust is denied....
“The Court has tremendous sympathy for this family which suffered the grievous loss of the young wife and mother. Michael was acting as guardian ad litem for both Audrey and Ashley in negotiating an exceptionally favorable settlement, given the MICRA limitations, and the high probability of an early death for Audrey. Michael and Audrey were married for less than four years before Audrey died.... The probate court approved the settlement and the terms of the special needs trust (hereinafter ‘SNT.’). At the time of approval, the SNT provided that upon Audrey’s death, the Trust would be divided into two shares, an Exempt Share and a Marital Deduction Share.... This is spelled out with some specificity in paragraph 4.10 of the SNT. Sections (c) and (d) address the Exempt Trust, to be ‘held, administered, and distributed according to the terms of the Ashley Mariko Mitani Trust as set forth in paragraph 4.14.’ Paragraph 4.14 is fairly detailed in its directions. It contains three subparagraphs. The proposed modification essentially does away with the Ashley Mitani Trust. There is no guarantee under the proposed modification that Ashley will ever receive anything. Michael could, and hopefully will, remarry and live a long and productive life. The Court cannot imagine that it would have been in Audrey’s mind, were she capable of making the decision, to leave her daughter no share of the Trust benefits until after Michael’s death. True, she died intestate, and had all this money been in the bank instead of a trust, it may have gone straight out to Michael. But, a trust was established, for protection of assets, as a tax planning vehicle, and for the protection of Audrey’s survivors.
Medical Injury Compensation Reform Act of 1975.
“While Mr. Stern and Michael may have been intending a different Trust, what was submitted to the Court was ratified and approved, not only by the Court, but by Michael, a senior claims adjuster for Fireman’s Fund Insurance Company.... He signed and caused to be notarized the SNT on August 15, 2007, attesting that he had read the trust, that it correctly stated the terms and condition[s] under which the trust estate is to be held, administered, and distributed, that he approved the trust agreement ‘in all particulars’, and that, as trustee, he approved and accepted the trusts provided for in the trust agreement.
“Michael argues that the trust, as currently written, does not provide for him to receive any distributions from the Exempt Share (even though he has the entirety of the Marital Deduction Share). Michael argues... that Ashley would ‘indirectly benefit from the trust modification’ insofar as payments to Michael for his ‘support and care’ would ‘provide Ashley with a better childhood.’ But the reverse argument can be made; he indirectly benefits from the Exempt Share insofar as he is allowed to make discretionary distributions of principal or income to Ashley if needed for her health, education, support, and maintenance. The Bilafer [v. Bilafer, supra, 161 Cal.App.4th 363] case allows a court to reform a trust to correct a drafting error and to comport with the settlor’s intent. (The case held, among other things, that a non beneficiary trustor has standing to bring a petition to reform a trust to conform to the trustor’s intent.) In our case, the money belonged to Audrey; Michael was acting as her guardian ad litem, and the guardian ad litem of Ashley. He’s not really the settlor, even though the SNT defines him as such.
“While the Court appreciates Mr. Stern’s candor and humility in acknowledging his error, perhaps he can rest a little easier in the knowledge that it is very unlikely that the Court would have approved the SNT as drafted in the second amended trust. Would the young bride and mother have left all to Michael, to the tune of over $3 million dollars, and only $250,000 to Ashley? No one can answer that question. The Court can only predict what she would have ruled had the proposed trust been submitted to her. It is uncontroverted that Mr. Stern and Michael ‘discussed a trust that would have an Exempt Share that named Michael as a beneficiary during his lifetime and that the Exempt Share would distribute following [Michael]’s death.’... That may be what was discussed, but it’s not what was drafted, reviewed, signed, and then later approved by the probate court.”
F. Analysis
Our analysis necessarily begins by reiterating that Audrey’s special needs trust, which Michael’s petition seeks to modify, was created as an irrevocable trust, approved by court order. The question we consider is whether the probate court abused its discretion in determining the proposed modification was not warranted by the reasons argued by Michael in his petition for modification.
1. Settlor’s Intent
“At common law, a trial court had the equitable power to reform an irrevocable trust where a drafting error defeats the trustor’s intentions. [Citations.] Ike [v. Doolittle, supra, 61 Cal.App.4th 51] confirms that this authority remains today. [Citation.]” (Bilafer v. Bilafer, supra, 161 Cal.App.4th at p. 369.) Michael argues that the special needs trust may be modified to reflect the true intent of the settlor, which the trust denominates as Michael. However, Michael’s role as settlor of Audrey’s special needs trust was due solely to his status as Audrey’s guardian ad litem, because Audrey was incapable of acting as settlor on her own behalf. Therefore, Michael’s argument that the special needs trust may be reformed to conform with his intent as the settlor is not applicable in this case.
2. Substituted Judgment
Michael also argues the probate court erred by failing to substitute its judgment for that of Audrey, pursuant to Probate Code section 2580. Michael contends that the probate court should have determined that Audrey would have wanted Michael to receive the total amount of assets remaining in the special needs trust after her death, because those assets were community property, rather than having the larger portion of the assets remain in trust for Ashley until she reached age 25.
Probate Code section 2580 “codifies the common law doctrine of substituted judgment, which provides that a trial court may authorize the transfer of estate property that a conservatee would have transferred had he or she been competent to act.” (Murphy v. Murphy (2008) 164 Cal.App.4th 376, 394.) That statute, however, specifically exempts from its reach special needs trusts, such as Audrey’s: “(a) The conservator or other interested person may file a petition under this article for an order of the court authorizing or requiring the conservator to take a proposed action for any one or more of the following purposes: [¶] (1) Benefiting the conservatee or the estate. [¶] (2) Minimizing current or prospective taxes or expenses of administration of the conservatorship estate or of the estate upon the death of the conservatee. [¶] (3) Providing gifts for any purposes, and to any charities, relatives (including the other spouse or domestic partner), friends, or other objects of bounty, as would be likely beneficiaries of gifts from the conservatee. [¶] (b) The action proposed in the petition may include, but is not limited to, the following: [¶]... [¶] (5) Creating for the benefit of the conservatee or others, revocable or irrevocable trusts of the property of the estate, which trusts may extend beyond the conservatee’s disability or life. A special needs trust for money paid pursuant to a compromise or judgment for a conservatee may be established only under Chapter 4 (commencing with Section 3600) of Part 8, and not under this article,... ” (Prob. Code, § 2580, italics added.)
At oral argument on appeal, Michael’s counsel contended the petition for modification of Audrey’s special needs trust was properly brought under Probate Code sections 3600 and 2580; counsel stated that because modification of dispositional terms was being sought, section 2580 was still the appropriate statute under which to seek relief. Counsel provided no authority for that proposition, and we have found none. It also bears noting that nowhere in the appellate record can we find any reference to Probate Code section 2580, whether in the original petition to create Audrey’s special needs trust, in either petition for modification of the trust, in the parties’ declarations or trial briefs, or in the reporter’s transcript. The probate court’s order approving the creation of Audrey’s special needs trust provides that it is “created under Probate Code sections 3600 et seq.” Audrey’s trust was created pursuant to section 3600, rather than section 2580; no valid reason has been presented to the probate court or this court that would permit the special needs trust to be modified under section 2580, rather than section 3600.
Indeed, the converse of this principle was recognized in Conservatorship of Kane, supra, 137 Cal.App.4th at page 406, where the appellate court concluded that because a trust established for a conservatee was not funded by a compromise or judgment in litigation, it was not established under the auspices of Probate Code section 3600, but rather was established under Probate Code section 2580, subdivision (b)(5).
Even if the probate court could have considered the law of substituted judgment in ruling on the petition to modify Audrey’s special needs trust, it would not have abused its discretion in refusing to approve the modification. Michael asked the probate court to assume that Audrey would have wanted him to have the bulk of the trust assets after her death. Michael noted that a separate settlement of $250,000 was obtained for Ashley, which was used to purchase an annuity that guarantees payments totaling $650,500. But Michael also received a separate settlement of $250,000. Additionally, Michael is entitled to the marital deduction share of the trust, which the parties estimate at approximately $800,000.
Michael argues Audrey, as a reasonably prudent person, would have wanted to provide for Michael during his lifetime, and to cause her assets to pass to Ashley only after Michael’s death. It is also reasonable to argue, however, that a reasonably prudent person in Audrey’s position might have believed Michael was already well provided for through the terms of the trust, and would have wanted the assets at issue here to pass directly to Ashley at age 25. We do not and cannot know what Audrey would have intended on this point. Therefore, the provisions of the special needs trust as originally submitted to, and approved by, the probate court should not be disturbed.
3. Community Property
Michael also argues the trust assets were community property, in which Ashley has no vested property right. As a general matter, damages for personal injuries sustained during marriage are community property assets. “Except as provided in [Family Code] Section 781 and subject to the rules of allocation set forth in [Family Code] Section 2603, money and other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for such damages, is community property if the cause of action for the damages arose during the marriage.” (Fam. Code, § 780.) Transferring the assets to the irrevocable special needs trust established for Audrey’s benefit did not change their character. (See Aguilar v. Aguilar (2008) 168 Cal.App.4th 35, 37, 39 40.)
“(a) Money or other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for those damages, is the separate property of the injured person if the cause of action for the damages arose as follows: [¶] (1) After the entry of a judgment of dissolution of a marriage or legal separation of the parties. [¶] (2) While either spouse, if he or she is the injured person, is living separate from the other spouse. [¶] (b) Notwithstanding subdivision (a), if the spouse of the injured person has paid expenses by reason of the personal injuries from separate property or from the community property, the spouse is entitled to reimbursement of the separate property or the community property for those expenses from the separate property received by the injured person under subdivision (a). [¶] (c) Notwithstanding subdivision (a), if one spouse has a cause of action against the other spouse which arose during the marriage of the parties, money or property paid or to be paid by or on behalf of a party to the party’s spouse of that marriage in satisfaction of a judgment for damages for personal injuries to that spouse, or pursuant to an agreement for the settlement or compromise of a claim for the damages, is the separate property of the injured spouse.” (Fam. Code, § 781.)
Family Code section 2603 provides: “(a) ‘Community estate personal injury damages’ as used in this section means all money or other property received or to be received by a person in satisfaction of a judgment for damages for the person’s personal injuries or pursuant to an agreement for the settlement or compromise of a claim for the damages, if the cause of action for the damages arose during the marriage but is not separate property as described in Section 781, unless the money or other property has been commingled with other assets of the community estate. [¶] (b) Community estate personal injury damages shall be assigned to the party who suffered the injuries unless the court, after taking into account the economic condition and needs of each party, the time that has elapsed since the recovery of the damages or the accrual of the cause of action, and all other facts of the case, determines that the interests of justice require another disposition. In such a case, the community estate personal injury damages shall be assigned to the respective parties in such proportions as the court determines to be just, except that at least one-half of the damages shall be assigned to the party who suffered the injuries.” Ashley argues the trust assets lost any community property character when the probate court assigned the assets to Audrey when establishing the special needs trust. By its terms and its placement in the Family Code, section 2603 applies to the division of property, which is not at issue here. We need not determine whether the reach of Family Code section 2603 is any broader.
However, because the special needs trust was irrevocable, Michael did not have the same right to his share of the community property that he would otherwise have had. (See Aguilar v. Aguilar, supra, 168 Cal.App.4th at pp. 37, 40 [after trust became irrevocable upon death of one spouse, surviving spouse lost the ability to transfer or otherwise control her share of the community property placed in the trust].) The probate court recognized this principle: “True, [Audrey] died intestate, and had all this money been in the bank instead of a trust, it may have gone straight out to Michael. But, a trust was established, for protection of assets, as a tax planning vehicle, and for the protection of Audrey’s survivors.”
G. Conclusion
The probate court did not abuse its discretion in denying Michael’s petition to modify the special needs trust. The proposed modification, which was not consented to by Ashley, would have substantially impaired Ashley’s interests. The probate court specifically noted that it was unlikely that the special needs trust would have been approved in the first instance if it had consisted of the terms Michael now seeks to include in it.
Disposition
The order is affirmed. Respondent to recover costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., IKOLA, J.