By John O'Grady, O'Grady Law Group
A probate judge had ruled Donald Sterling incompetent to manage his own trust, which included ownership of the Los Angeles Clippers.
Sterling’s wife Shelley then became sole trustee and, though he tried to revoke the trust, she sold the team for $2 billion. Sterling appealed, but the appellate court predictably upheld the probate judge’s order that Sterling was indeed mentally incapable of managing his trust due to encroaching Alzheimer’s and that his wife’s sale of the Clippers was valid despite the stay on appeal of the probate court’s order, because the risk of loss to the trust estate if the sale fell through was extraordinary or imminent given the $2 billion purchase price as compared with other offers and valuations.
The appellate court also held that it was proper for Shelley Sterling, as trustee, to wind up the affairs of the trust, even after Donald Sterling tried to revoke the trust, and get the best possible result for the beneficiaries in selling the Clippers, in accordance with her duty of loyalty as trustee.
When the owner of a trust (i.e., settlor) is no longer able to manage the trust in the best interest of the beneficiaries, it is the trustee’s responsibility to do so—even if his or her decisions conflict with the settlor’s wishes. Sterling v. Sterling, Cal.App. 2nd (2015).
About the author
John O‘Grady, O’Grady Law Group, was the 2012 chair of BASF’s Estate Planning, Trust & Probate Section.