05.11.2017

Court Determines the Principal Place of Trust Administration

Stegier v. Steiger, 2016 Cal. App. Unpub. LEXIS 5806, No. 37-2013-00072651

(Cal. App. Div. Aug. 5, 2016).

This case is an unpublished Appellate Division decision arising out of San Diego County, California.

Lee Steiger (“Lee”) petitioned the probate court in California to compel trustee Paul Steiger (“Paul”) to account for the Louise A. Steiger Trust (the “Trust”), for the period from January 10, 2000, to April 18, 2011.  The court applied California law to administer the Trust, and determined that Paul had no duty to account to Lee from January 10, 2000, through February 3, 2006, as the settlor was acting as co-trustee.  In addition, Paul was not required to account for the period of February 3, 2006, to October 29, 2010 as Lee was acting as co-trustee during that period.

The Court ordered Paul to filed an amended account for the period from October 29, 2010, through December 31, 2014.  Lee appealed the Order contending that New Jersey law should apply to govern the accounting and the court erred in holding that Paul had no duty to account for the majority of the pre-mortem period.

The Appellate Division affirmed the trial court’s application of California law and affirmed the court’s order limiting the scope of the accounting.

Notably, the Trust contains the following provision:  “This Agreement shall be construed for all purposes in accordance with the laws of the State of New Jersey.”  The Appellate Court determined that the use of the word “construed” as opposed to “administration,” implies that the settlor did not intend to designate a particular state’s law to govern trust administration.

The Court noted that New Jersey adopted the Uniform Trust Code, which contains a provision governing the principal place of administration of a trust, Section 108 of the Uniform Trust Code and N.J.S.A. §3B:31-8.  The California Court further noted that in the official commentary for the Uniform Trust Code, section 108, the drafters note: “While transfer of the principal place of administration will normally change the governing law with respect to administrative matters, a transfer does not normally alter the controlling law with respect to the validity of the trust and the construction of its dispositive provisions.” U. Trust Code, §108, cmt.

Here, although the Trust provided for New Jersey law as to its construction, the Court found that it did not expressly indicate Louise’s intent regarding which state’s law should apply to trust administration.  Thus, under these circumstances, the Court found it was natural to infer that the settlor intended that the law of the place of administration would apply – in this case, California.