It is not common for federal circuit courts to rule on trust litigation, and it’s even less common for a federal circuit to analyze trust law outside of its jurisdiction. In April 2024, an Arkansas federal court applied California law to deny a request to modify a trust and approve a settlement agreement conforming to the modification. On February, 26, 2026, the Eighth Circuit Court of Appeals affirmed this decision in the matter of Stiny Trusts v. Robins.
Understanding these multijurisdictional rulings can help parties better anticipate challenges and plan for successful resolution of disputes.
Background on the Dispute and Proposed Settlement
The dispute arose because the decedent, Mary Stiny, named her mother, Della Moore, as a beneficiary of a 2.66% share of her trust. But Mary’s trust stated that if Della “fails to survive [Mary], then this gift shall lapse.” Della did, in fact, predecease Mary by two years. When Mary died, Della’s nine children alleged the lapse provision was “vague and potentially contradictory” to other provisions of the trust that provided anti-lapse provisions for other gifts.
The trustee reached a settlement with Della’s children that called for them to receive Della’s 2.66% share of Mary’s trust estate. The trustee filed a petition for court approval of the settlement agreement. Two of the beneficiaries joined in the petition and the remaining beneficiaries were silent. The parties stipulated that California law applied to the matter.
The Arkansas district court denied the trustee’s petition for approval because it interpreted the request as improperly requiring modification of the trust, which it declined to do. Della’s children appealed the decision, and the trustee defended the district court’s opinion on appeal.
Appeals Court Ruling Rejecting Modification of the Trust
The Eighth Circuit affirmed the lower court’s decision. The court first rejected the argument that Mary’s trust was ambiguous. Mary expressly provided that the gift to her mother would lapse if her mother did not survive her, and Mary did not otherwise name her siblings as beneficiaries. The court was compelled to enforce Mary’s intent. The interpretation offered by Della’s children failed to give effect to the language in the trust, disregarded Mary’s expressed intention, and allowed a disinherited heir to inherit.
Next, the court rejected the argument that the court had the power to modify Mary’s trust. In California, an irrevocable trust can be modified only if all beneficiaries consent and if they obtain a court order approving the modification. (Cal. Prob. Code, §15403, subd. (a).) Furthermore, even if all the beneficiaries consent, the court cannot modify the trust if “continuance of the trust is necessary to carry out a material purpose of the trust,” unless the court “in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust.” (Id., subd. (b).)
The Eighth Circuit upheld the lower court’s conclusion that modifying the trust would result in frustrating Mary’s distributive intent to provide a larger share for certain grandchildren. The asserted goal of “family harmony” was not sufficient to override Mary’s express intent.
Implications for Parties Involved in Disputes
From the perspective of California litigation, this outcome is surprising. Trust and estate litigators in California regularly reach settlement agreements and obtain court approval of them. At the same time, the attorneys, and specifically the trustee’s attorney, go to great lengths to ensure the consent of, or at least the participation of, all beneficiaries. California allows judges to order all the interested parties in a matter to attend mediation. If a party receives notice of an ordered mediation and chooses not to attend, that party will not be heard to object to a settlement agreement reached in that party’s absence even if it greatly reduces receipt of benefits under the trust.
What Now?
Anticipating how courts may respond to requests to approve settlement agreements is essential for resolving disputes. Key takeaways:
- Review testamentary instruments to ensure lapse or anti-lapse provisions and beneficiary designations are clear to avoid disputes arising after death.
- Before entering into settlement agreements that alter trust distributions, confirm that such alteration will be accepted by the court that has jurisdiction. It is generally helpful to obtain the consent of all beneficiaries and/or ensure they actively participate in the mediation process.
- If the trust involves parties or assets in multiple states, consult with legal counsel from the primary jurisdiction to evaluate jurisdictional risks
If you have any questions regarding the Stiny Trusts decision or its implications for your trust interests in California, please contact Erika Gasaway, or your regular Lathrop GPM attorney.