USA – CALIFORNIA Trends and Developments Contributed by: Jennifer Jordan McCall, Paul Fraidenburgh, Alexandria Marx and Maria Williams, Pillsbury Winthrop Shaw Pittman LLP
Section 1402 (a)(13) itself contemplates that limited partners may provide services, making a strict pas - sive investor interpretation textually incoherent. The decision creates a circuit split with the Tax Court’s Soroban framework and is expected to have signifi - cant implications for self-employment tax planning in limited partnerships. Estate tax – committed intimate relationships and Washington State In Matter of Estate of Franks , 36 Wash. App.2d 307 (2026), the Washington Court of Appeals held that the surviving partner’s one-half interest in community- like property acquired during the 40-year committed relationship was not part of the decedent’s taxable estate at the time of death, applying the Washington Supreme Court’s Olver doctrine that each partner in a committed intimate relationship owns an undivided one-half interest in jointly acquired property from the time of acquisition, even though all property was titled solely in the decedent’s name. This avoided an addi - tional USD824,000 of Washington estate tax. Trusts Trust administration and fiduciary duty The 2026 term produced a rich body of trust admin - istration decisions. In Geisenfeld v Geisenfeld , 277 N.E.3d 761 (2026), the Ohio Court of Appeals affirmed that a trustee-attorney who acted vindictively against a beneficiary sibling – including stating that she want - ed to make sure he had no access to personal prop - erty – breached her fiduciary duties and was liable for attorney fees for the entire litigation, including fees incurred after a settlement agreement, because the trustee had fraudulently induced the settlement. The court’s finding that the trustee had stooped to punking and gaslighting the beneficiary underscored that fidu - ciary obligations demand neutrality and good faith, not self-interested conduct. In Marshall v Marshall , No 14-25-00322-CV, 2026 WL 585157 (Tex. App. 3 March 2026), the Texas Court of Appeals confirmed that trust beneficiaries retain standing to challenge unilateral trustee modifications of governing law. In Matter of Trusts Created by Will of Damiano , 245 A.D.3d 1092 (2026), the New York Appellate Division
reaffirmed that courts should remove a trustee only if the trustee has negatively impacted the trust or failed to serve its purpose. The Eighth Circuit in In re Elijah and Mary Stiny Trusts , 167 F.4th 1019 (2026) addressed trust modification under California Probate Code Section 15403, holding that the requirement that all named beneficiaries con - sent to modification is not satisfied by mere failure to object after notice; affirmative consent from all named beneficiaries is required. The court also affirmed the district court’s discretionary refusal to modify the trust on the ground that the reasons for modification did not outweigh the interest in accomplishing the trust’s material purpose. In Fulks v Fulks , 87 Va. App. 685, 929 S.E.2d 467 (2026), the Virginia Court of Appeals held that breach of trust claims are governed by the five-year general limitations period under Virginia’s Uniform Trust Code, not the shorter one-year period applicable to a trus - tee’s report. In In re Tung Trust , B243197 (6 June 2026) the Cali - fornia Court of Appeals held that a trust’s 30-day deemed-predeceased provision did not clearly over - ride California’s anti-lapse statute, Probate Code Sec - tion 21110, because the trust lacked explicit language disinheriting the predeceased beneficiary’s children. The court reversed the probate court’s summary adju - dication and directed that the predeceased benefi - ciary’s children be allowed to benefit under the trust. This is a useful drafting and litigation case on survival clauses, anti-lapse, failed transfers, and whether boil - erplate language supplies a “contrary intention”. Spendthrift trusts and asset protection The 2026 term produced important decisions on the limits of spendthrift protection.In In re Samatas , No AP 21 A 00237, 2026 WL 612553 (Bankr. N.D. Ill. 2 Mar. 2026), the Bankruptcy Court for the Northern District of Illinois found that the debtor’s discretionary trust was not a valid spendthrift trust because the debtor exercised effective dominion and control over the trust corpus, and alternatively held that the trust was an alter ego of the debtor, considering the conduct of trust beneficiaries, trustees, and investment advisors.
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