When an attorney is also acting as the trustee, there are very specific limitations on the attorney getting compensated both as counsel and as trustee. It may seem like an efficiency to have a two-for-one situation, but it may end up being double the work for half the money.
An attorney who also serves as the trustee may receive either the trustee’s compensation or compensation for legal services performed for the trust, but not both, unless the trustee obtains approval for the right to dual compensation by court order or there is no objection from persons entitled to notice, as provided under Prob C §15687(d). Prob C §15687(a).
The restriction against a trustee being compensated for legal services also applies to anyone with specified relationships or associations with a trustee, unless the trustee waives trustee compensation or gets approval under Prob C §15687(d).
And you can’t get out of these statutory requirements by waiver; any such waiver is void as against public policy. Prob C §15687(e).
In addition to these statutory restrictions, there are also significant ethical issues involved when an attorney takes on the role of trustee. Because the attorney owes a duty of fidelity to the client, “all business dealings between an attorney and client whereby the attorney benefits are closely scrutinized for any unfairness on the attorney’s part.” Magee v State Bar (1962) 58 C2d 423, 430, 24 CR 839. This scrutiny is justified by the attorney’s dual obligations to avoid taking advantage of the client and to provide the client with services that are in the client’s best interests, regardless of the attorney’s involvement.
Although accepting a trusteeship may appear to benefit the client, the position actually benefits the attorney, who has an opportunity to earn compensation. Because the attorney’s self-interest is involved once he or she is named trustee, the attorney may not be able to give the disinterested advice that the client deserves.
The attorney must also determine whether, in holding the position, he or she can comply with the requirement of Cal Rules of Prof Cond 3-300 to avoid adverse interests. The attorney’s acceptance of the role of trustee is explicitly covered by that rule because to agree to serve as trustee of a client’s trust is to “enter into a business transaction” with the client.
The client’s execution of the trust instrument is not sufficient written consent to the terms of the transaction to meet the requirements of Cal Rules of Prof Cond 3-300(C). The case of Schneider v State Bar (1987) 43 C3d 784, 239 CR 111 made clear that exculpatory language in the trust instrument will not excuse an attorney from fulfilling the separate requirements of the California Rules of Professional Conduct.
For everything you need to know about the crucial issues of trustee compensation, attorney fees, and other administrative costs, turn to CEB’s award-winning book California Trust Administration, chap 9. Also check out CEB’s program Practical Problems in Trust Administration, available On Demand. On drafting provisions on trustee compensation, turn to CEB’s Drafting California Revocable Trusts and California Will Drafting.
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