IS A TRUSTEE PERSONALLY LIABLE UNDER A CONTRACT WHEN A CONTRACT IS SIGNED IN HIS CAPACITY AS TRUSTEE AND THAT FACT IS KNOWN TO THE CREDITOR?

Short Answer: No.

Analysis: Under the old law (pre-1987), a trustee would have been personally liable. The CA legislature, however, amended Cal. Probate Code Section 18000, which states that "unless otherwise provided in the contract or in this chapter, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administration of the trust unless the trustee fails to reveal the trustee's representative capacity or identify the trust in the contract."

Significance: When we are representing individuals in their capacity as trustees, our retainer agreement should include language that makes the trustee personally liable for attorney's fees and advanced costs. Otherwise, we face difficulty collecting on any judgment we obtain against a successor trustee if the trust has no assets (or the assets have been disbursed to the beneficiaries). The remedy at that point would be to file a motion and amend the judgment, which is a far more difficult and time consuming process.

IS A CERTIFICATE OF INDEPENDENT REVIEW REQUIRED WHEN THE DRAFTING ATTORNEY IS NAMED AS TRUSTEE, BUT WHO IS NOT A DONATIVE TRANSFEREE?

Short Answer: Yes, if the drafting attorney is the sole trustee designated by the trustor.

Analysis: California Probate Code § 15642 states that a "trustee may be removed in accordance with the trust instrument" and the "grounds for removal of a trustee by the court include," among others, when the "sole trustee is a person described in subdivision (a) of Section 21350 (i.e. person who drafted the instrument), whether or not the person is the transferee of a donative transfer by the transferor…" (Probate Code § 15642 (a) and (b)(6))

The Probate Code, however, states that subdivision (b)(6) does not apply if "the instrument is reviewed by an independent attorney who (1) counsel the settlor about the nature of his or her intended trustee designation and (2) signs and delivers to the settlor and the designated trustee a certificate in substantially following form:"

This independent review and certification may occur either before or after the instrument has been executed.