Consider the lawyer who lacks a working familiarity with trusts, and with estate planning generally. He prudently and ethically refers a client in need of an estate plan to a well-respected lawyer who also happens also to be in the business of serving as a trustee. The lawyers are affiliated neither personally nor professionally. The estate-planning lawyer designates himself as trustee of a trust that he has drafted for the settlor and then presents the draft to the referring lawyer for his review. Is the referring lawyer being set up? The instrument has a fiduciary exculpation clause.
The lawyer who drafts a trust instrument for a lay client is an agent-fiduciary of the client. When a lawyer who is also the designated trustee inserts a fiduciary-exculpation clause into the trust instrument, the lawyer’s agency-based duty of undivided loyalty to the settlor principal is implicated. Such exculpatory clauses are taken up generally in §7.2.6 of Loring and Rounds: A Trustee’s Handbook (2025), which section is reproduced in the appendix below. There are several countermeasures that might be taken at the drafting stage to neutralize the presumption that the clause’s insertion is the product of undue influence. If the presumption is not neutralized at the drafting the clause may well be unenforceable once the trust is up and running. One such countermeasure is for the prospective settlor to consult with independent counsel on the advisability of the clause’s insertion. Most likely that would be the referring attorney in our fact pattern. Lurking in the official comment to Uniform Trust Code § 1008 Exculpation of Trustee is some language which, if taken literally and interpreted expansively, would shift legal liability for negligent instrument-drafting from the shoulders of the estate planning lawyer to the shoulders of the hapless referring attorney.
UTC § 1008(a) provides in part that a term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to (sic) the settlor. At the instrument-drafting stage, our estate-planning lawyer is in an agency-based fiduciary relationship with the prospective settlor. Further on, UTC § 1008(b) provides that “[a]n exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor.” The accompanying official comment asserts that the requirements of UTC § 1008(b) are satisfied if the settlor was represented by independent counsel. Next there is this concerning sentence, which is what this posting is all about: “If the settlor was represented by independent counsel, the settlor’s attorney is considered the drafter of the instrument even if the attorney used the trustee’s form.” Unaddressed is whether our referring attorney nonetheless would be considered the “drafter” for all purposes no matter what, even if he were to attempt via a duly composed and explained engagement letter to limit the scope of his involvement in the estate-planning process to merely advising the prospective settlor on trustee exculpation. And why and for what purpose would our referring attorney be “using” the estate-planning attorney’s “forms”? The referring attorney does not practice estate planning and has no desire even to dabble in the specialty.
Perhaps this liability-shifting language really has nothing to do with scrivener-trustee exculpation. Rather, it was just gratuitously slipped into the text at the last minute at the behest of some constituency as an oblique re-affirmance of the settled doctrine that a bank is not engaging in the practice of law if a lawyer happens to use one of its sample trust forms. Banks by statute are generally prohibited from engaging in the practice of law. Still, the lawyer for our hapless referring attorney, now the subject of a lawsuit for the tort of negligent drafting of a trust instrument, will have his work cut out for himself persuading the superior-court judge that the comment’s facially unambiguous legal-liability shifting language has nothing to say regarding the allocation of tort liability between two licensed unaffiliated lawyers each of whom to a greater or lesser degree had some involvement in the preparation of the same ill-fated estate plan.
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