MCLE SELF-STUDY ARTICLE CONFUSION IN THE WORDING AND APPLICATION OF THE LAWS GOVERNING THE ENTITIES AND INDIVIDUALS CONDUCTING THE BUSINESS OF ACTING AS A FIDUCIARY SUGGESTS A NEED FOR IMPROVEMENT

Written by Ralph E. Hughes, Esq.^*

I. SYNOPSIS

California law long had a relatively simple approach to identifying the entities and the individuals that could be permitted to conduct the business of acting as trustees, executors, administrators, guardians, and conservators of estates. The rule for entities was that the only entities that could serve in those positions were corporations and the only corporations that could do so were banks and trust companies.⁰¹ There was an absence of rules for individuals. Any individual could conduct the business of acting as trustee of trusts, or as executor, administrator, guardian, or conservator of any number of estates.

The historic approach reflected the state’s interest in protecting wards and beneficiaries. A bank or a trust company—a limited liability entity with an unlimited lifespan—was empowered to exercise extensive fiduciary powers over estates in probate court and trusts only if it was subject to statutes and regulations that protected beneficiaries.⁰² At the same time, individuals—often but not always attorneys or Certified Public Accountants ("CPAs")—were permitted to act as trustees, executors, administrators, guardians, and conservators of estates in any number of cases without being subject to any specific statute or regulation directed at their general ability to act as a fiduciary or their financial ability to make wronged beneficiaries whole. However, their lifespans were limited and their individual liability to beneficiaries was unlimited.