California Court Reins In a Family's 20-Year Equalization Fight — Equalization Clause Lessons

Family trust litigation often turns on a single sentence buried in an otherwise routine distribution clause. A new published opinion from California's Fourth District shows exactly how much can ride on that sentence, and how far a trial court can stray from it when a family's finances have been informal for decades.

The case involves an equalization clause. Families include equalization language in trusts for a clear reason. Parents want the children treated fairly. One child borrowed money. Another received a down payment. A third never asked for anything. The parent does not want the last accounting to pretend those transfers never happened. So the document says, in substance: treat unpaid loans and unequal gifts as advances, and adjust the shares. That is a sensible idea. It is not a license to reopen two decades of rents, sales, and informal family bookkeeping under the heading of “fairness.” A California appellate court has just drawn that line in published language that is useful anywhere a lawyer drafts a hotchpot or equalization clause, including Ohio and Missouri.

The Trust and the Fight

Jean Sandford created a trust in 1998 for her five children: Debra, Linda, Mark, Michael, and Pamela. She restated it in 2000 and named all five as successor trustees. The trust called for equal shares, but it included an equalization provision. That provision did two specific things. It said any unpaid loan from Jean to a child would be deducted from that child's share. It also said unequal lifetime gifts would count as advances against each child's share, with the trustee making adjustments to even things out.

Over the next two decades, several siblings managed family properties and finances in a loose, informal way. Family members executed quitclaim deeds, sold property, and entered into rental arrangements. When tensions boiled over, Debra and Linda petitioned the Orange County probate court for an accounting and to remove Mark and Michael as trustees. Mark and Michael counter-petitioned to quiet title to two disputed properties.

What the Trial Court Did

The Superior Court sided with Debra and Linda on nearly everything. It conducted what the Court of Appeal called an extensive audit going back twenty years, and it treated years of rental income and sale proceeds from family properties as early distributions subject to the equalization provision. On that basis, it ordered offsets against Mark's and Michael's shares, removed them as trustees, required formal accountings, and awarded Debra and Linda their attorney fees out of the trust.

Notably, the trial court also found that separate claims against Mark and Michael for financial elder abuse and breach of fiduciary duty were barred by the statute of limitations. Those claims did not survive on their own.

Mark and Michael appealed

What the Court of Appeals Held

The panel reversed the equalization rulings. Its reasoning is the part worth reading closely. The equalization provision, the court held, permits a reduction only for unpaid loans and unequal gifts. It does not reach rental income, sale proceeds, or the broader universe of informal financial dealings the trial court had folded into its twenty-year audit. The provision's language was plain, and the evidence showed Jean was focused specifically on unpaid loans when she wrote and later restated the trust. That left no ambiguity to interpret.

The more pointed part of the opinion addresses why this mattered so much. The court noted that if Mark and Michael had genuinely engaged in misconduct in those property transactions, the trustee would have had a cause of action against them. But the trial court had already correctly found that any such claims were time-barred. The Court of Appeal held that the trial court could not use the equalization provision as a workaround: it could not achieve, through a twenty-year "equalization" accounting, the same result that a time-barred breach-of-fiduciary-duty claim would have produced. Because the equalization orders fell, the attorney fee award built on top of them fell too. The court affirmed the rest of the judgment, including the denial of the quiet-title claims and the removal of Mark and Michael as trustees, and sent the case back for further proceedings.

Why this Case Belongs in a Drafting File

Two lessons stand out, and both are ones worth building into how you draft and later defend an equalization or hotchpot clause.

First, courts will read these clauses narrowly, not functionally. A clause that lists "unpaid loans" and "unequal gifts" will be read to mean exactly that, even after decades of family conduct that looks, informally, like a much broader running account. If a client's actual intent is to true up rental income, property use, below-market sales, or any other benefit one child received at another's expense, the clause needs to say so. A drafter who wants a true "hotchpot provision," one that sweeps in the informal financial reality of how families actually behave, has to enumerate that reality or use deliberately broad catch-all language tied to the trustor's overall intent. "Loans or gifts" will not stretch to cover it later, no matter how sympathetic the facts.  

Second, an equalization clause is not a substitute for a timely claim. This is the sharper point. A beneficiary, or a trustee acting for the beneficiaries, cannot let a breach-of-fiduciary-duty or elder-abuse claim go stale and then recover the same ground by recasting the same transactions as an equalization adjustment. If the underlying claim is time-barred, a court will not let an accounting theory function as its replacement. That cuts both ways for drafting: a broadly worded equalization clause is not a way to build in a permanent, limitations-proof audit right, and a client relying on one for that purpose is relying on something the clause cannot deliver.

The opinion is Sandford v. Sandford, Nos. G064699 and G065223 (consolidated), Cal. Ct. App., Fourth District, Division Three, filed and certified for publication September 2, 2026, on appeal from the Orange County Superior Court. 

Because the opinion is only days old as of this writing, it's worth checking the docket before citing it for whether a petition for review has been filed with the California Supreme Court.

Why I Almost Never Recommend Naming Three Co-Trustees

When clients ask whether all three children, or all their beneficiaries, or just three trusted people, should serve together as co-successor trustees, I generally recommend against it. It may feel like the "fair" or inclusive choice. In practice, it often creates more problems than it solves. Here are the primary reasons, along with several secondary considerations.

1. Trust administration is largely an administrative function, not a deliberative one

Serving as trustee is, for the most part, a series of administrative tasks: paying bills, filing tax returns, managing accounts, making distributions, keeping records. These aren't decisions that benefit from group input the way a business strategy decision might. Think of how most married couples handle their finances. One spouse balances the checkbook and manages the day-to-day accounts, while the other is largely uninvolved. That division of labor works well precisely because it eliminates redundancy and delay. Trust administration is similar. It's typically not a job where "two heads are better than one." It's best done efficiently by one accountable person who can act without coordinating every check, filing, and distribution with two other people.

2. Multiple trustees create political dynamics that damage family relationships

In my experience, this is the more serious problem. When three siblings or family members are named as co-trustees, two of them almost always align, by personality, geography, or just a pattern of who talks to whom, while the third gradually feels left out. This is rarely intentional, at least at first. Think of any three people you know, and you'll likely find that two of them talk more easily to each other than either does to the third.

Over time, the excluded co-trustee begins to feel that decisions are being made without them. They're presented with a fait accompli instead of being genuinely consulted. That sense of exclusion breeds resentment. Keep in mind, too, that everyone is still grieving, and emotions and sensitivities may be heightened.  Resentment among co-trustees often escalates into full-blown disputes, sometimes over matters they would not ordinarily disagree on. Some of those disputes become serious enough to result in litigation or a will or trust contest. A single trustee avoids this dynamic entirely. So, usually, do two trustees with a genuinely good working relationship.

Additional reasons to avoid three co-trustees

• Delay. Unanimity or majority-vote requirements slow everything down. Banks, title companies, and other institutions often require all co-trustees to sign documents, even if the trust permits less or allows one trustee to bind all of them, which means routine transactions can stall while everyone waits on one person's signature or availability.

• Shared blame, regardless of fault. Each co-trustee has an independent legal duty to watch the others. Under most states' trust codes, a co-trustee isn't automatically on the hook for a colleague's misconduct simply by holding the title. But a co-trustee who fails to catch a serious breach, or fails to act once one comes to light,  can be held personally liable for it. In practice, that means each co-trustee faces real risk for decisions they didn't make and may not have fully understood. Not because the law assumes shared guilt, but because the law expects each of them to have been watching.

• Cost. More trustees usually means more communication, more questions, more meetings, and more professional consultations to get everyone comfortable with a single decision. All of that adds administrative expense and, in some cases, more trustee compensation to pay for it.

• Diffusion of responsibility. When three people are equally responsible, each one tends to assume someone else is handling a given task. Important deadlines and duties can fall through the cracks as a result.

• Majority rule has a cost. With three trustees, disagreements can resolve into a 2-1 vote rather than genuine consensus. That outcome doesn't solve the political problem described above; it just formalizes it.  The trustee on the losing end knows exactly who voted against them.

What I typically recommend instead

I typically recommend naming one trustee, with a full line of successors-- not just one backup, but two, three, or four, named in order, in case the first choice cannot or will not serve. Occasionally, two trustees make sense if they have a demonstrated history of working well together. Some family configurations invite two trustees by design: a representative from among the natural children serving together with a representative of the stepchildren, for example, giving each side of a blended family a seat at the table.

Naming a single trustee doesn't mean leaving that person unsupervised, and it shouldn't. The answer to "who watches the trustee" isn't a second or third co-trustee.  It's oversight that doesn't require day-to-day coordination.  In simple plans, beneficiaries take on this responsibility by reviewing decisions and reports and asking questions.   A trust protector with the power to remove and replace a trustee, a beneficiary's right under most state trust codes to demand a periodic accounting or report, or a corporate trustee paired with a family member in an advisory rather than co-equal role can all supervise a sole trustee without recreating the committee problem this article is about. 

I've written elsewhere about trust protectors and corporate trustees in the context of estate administration. The short version: supervision and shared administration are two different tools, and confusing them is part of why three-trustee arrangements go wrong.

If it's your trust, you are the boss. These are recommendations based on specific considerations, not hard-and-fast rules. You decide which considerations matter most in your estate plan.

These considerations preserve administrative efficiency while reducing the risk that the trust becomes a battleground for old family dynamics.