Trust Signature Defined
A trust signature simply refers to the manner in which a trust document is signed by the settlor or settlors (the individuals who create the trust). The trust signature is important to ensure the validity and enforceability of a trust document in particular jurisdictions. Although some states and courts have upheld trusts with signatures that did not closely follow state laws, other states have been less flexible. Because the laws regarding establishing valid trusts differ between state lines , the trust signature requirements must be considered.
Since the purpose of establishing a trust is often to administer or distribute property and other assets, the failure to adhere to trust signature requirements could put the entire trust document and its validity into question. In some instances, a court may recognize a trust with an invalid trust signature if it is found through clear and convincing evidence that the settlor(s) of the trust intended to execute the trust despite the deviation from the requirements (e.g., the signatures were not notarized or witnessed when they should have been).
Statutory Requirements for Trust Signature
Under California probate code Section 15800 & 15801, the signature on a Trust Document must be valid. Both sections set forth the formalities – the need for a signature in front of witness or a notary, as well as the necessity for the witnesses to sign the document in the presence of one another. Note that Section 15800 relates specifically to revocable trusts while Section 15801 relates to irrevocable trusts. Because most people in California operate revocable trusts, Section 15800 is cited much more than Section 15801.
Variations in Trust Signature Laws by State
Trust signature requirements can vary and it is important to understand how your home state laws may govern the requirements for such signature requirements. In some states, signing in the presence of a notary or two witnesses is sufficient under state law. When agreement is executed in certain states, those that have adopted the Uniform Electronic Transactions Act, some states may allow electronic signatures but with different requirements.
Depending on the state, there may also be a requirement for Acknowledgment of Signature. Often the requirement for "Acknowledgment of Signature" is highlighted in the contract or agreement. Usually, if the contract or agreement does not require "Acknowledgment of Signature," then signing in the presence of a notary or two witnesses may be accepted under state law.
In addition, some states may require that the agreement be notarized absent of Acknowledgment. Whereas some states may require that the trust documents be dated on that date they are actually executed.
Errors and Omissions in Trust Signatures
One of the most common mistakes that people make when signing trust documents is not having all of the required signatures on the documents. When the signature of even one trustee is missing, and there is more than one trustee of a trust, that missing signature may prevent the trust from being valid.
Example:
A married couple decides to transfer their home into trust. When they create their trust documents, they name themselves as the co-trustees of the trust. The couple signs the trust documents, but not the deed transferring their home into trust.
Assuming that there are no later amendments to the trust, the trust will still be valid, and the couple’s wishes as to who is to receive their home will be carried out. But because the couple signed the deed as individuals, and not as trustees of the trust, the deed to the trust will need to be "cleansed" before the home can be sold or refinanced. The exception to this rule is if the couple adds a certification of trust to the deed, excusing the trustee signature requirement. Under California law, a certification of trust has the same effect as the recordation of the trust.
Missing or improperly identified signatures on any other document is equally damaging. I helped one couple clean up a long-time family trust where the signatures of each of the children were not properly identified. Because "John" and "Paul" were not identified as trustees of the trust, but merely as "John’s son" and "Paul’s daughter", the trust could not be administered. A quitclaim deed and the certification of trust were able to curtail damage of the improperly executed trust documents, but if the trust had been invalid, a probate proceeding would have been necessary.
Even witnesses can cause a trust to not be valid. Different laws may be applicable depending on when the trust was created, in California, for example, the law in place prior to 2002 required witnesses for all testaments. Thus, if a trust was created prior to 2002 and lacked any required witnesses, it would have been invalid. If the trust was created after 2002, then the signatures of witnesses may not have been required, but merely the signature of the settlor and notarization of the settlor’s signature. In these days, witnesses are not as often required but should nonetheless be properly utilized.
While Mercantile Trust Co. v. Davis (1940) 16 Cal.2d 530, 537; Probate Code § 18900; Uniform Trust Code Section 403(b)(2) addresses the issue of signature requirements, case law is also instructive. Courts can make all kinds of creative ways to render a trust valid. But why not save time by closely examining the document for signatures?
Witness and Notary Requirements
Witnesses play an important role in the requirements for a valid trust signature. Some states merely require the presence of one witness, while other states require two. In many jurisdictions, in addition to the witness requirement, there is also a requirement that the persons executing the trust appear before a notary public to affix their signatures in the presence of the notary. States that require witness execution generally allow a variety of people to serve. Any two persons of legal age can serve as witnesses.
However, some states are more restrictive . Several states limit the potential pool of witnesses to either:
● persons who are disinterested in the outcome of the trust, or
● persons who are qualified to notarize the signature.
Even in states that do not have such restrictive requirements, it is good practice to have a disinterested person be the witness to the signing. This protects the trust’s validity by making it less likely that a witness to the trust could later be found not to have been legally competent to act as a witness.
The vast majority of states require that the person executing the trust write his or her name. It is considered a best practice for the trustee to sign all of the trust documents.
Electronic or Digital Signatures for Trusts
The legislation that governs the administration of a Texas trust requires the trust document to be signed by the settlor and the trustee. Courts have established that in considering the validity of the trust, the terms of the trust document must be proved. See, e.g., Hatten-Brown Afshari Living Trust U/A 9/20/96 v. United States, 2009 WL 996106 (N.D. Tex. Apr. 14, 2009). In the past, the settlor’s and trustee’s signatures were required to prove that the trust was executed and to establish its terms. In the twenty-first century, the use of electronic signatures has become more common. Are electronic trust documents that use an electronic signature valid under the statute of frauds as codified in section 26.01(b)(6) of the Texas Business and Commerce Code? Texas law recognizes a "statutory definition" of electronic signature instead of a common law definition. Defined as an "electronic sound, symbol, or process" that is attached to an electronic record and "executed or adopted" by a person with the intent to sign the record, electronic signatures have become commonplace for many contractual arrangements. TEX. BUS. & COM. CODE § 322.002(9).
To determine whether this new form of signature applies to trusts, we first look at the governing statutes. Section 113.052 of the Texas Property Code states: An instrument in writing that names two or more trustees and that is executed by all of them in the way required for a deed to real property or the possession thereof and that grants, conveys, or confirms a beneficial interest in real property to another person is effectual against every person if: (5) it is attested by two or more credible witnesses who are not beneficiaries and are not related to the beneficiary in any manner.
Similarly, section 113.051 of the Texas Property Code states: An instrument in writing that is executed by the trustee or trustees of a trust that names two or more trustees who are identified in a way that makes the identity of each trustee clear describes the trust in a way that clearly identifies the trust and states the date of the trust or, if no date is given, the year in which the trust is created does not require the signature of an individual who is the settlor of the trust. The signature of only one of the identified trustees is sufficient to execute the trust.
While these two sections expressly address the signature requirements for written instruments, their language does not explicitly rule out the use of electronic signatures. Instead, it is assumed that Texas trust statutes would be governed by the definition of electronic signature outlined above.
Although the use of electronic signatures on trust documentation is not explicitly recognized, Texas courts have accepted electronic signatures in other contexts. In 2012, an amendment was added to the Texas Civil Practice and Remedies Code to explicitly state that electronic signatures could be used for sworn written declarations. Further, in JoshLink Enterprises, Inc. v. Kelly, 2012 WL 5933206 (Tex.App.-Houston [1st Dist.] Nov. 27, 2012, no pet.), the Houston First Court of Appeals held that an electronic signature was sufficient to support an award of attorneys’ fees. See TEX. CIV. PRAC. & REM. CODE ANN. § 132.001. This is further evidence that Texas courts have endorsed the use of electronic signatures in the estate planning context.
Aside from the lack of any case law, there are benefits to using electronic signatures in the administration of a trust from the settlor’s standpoint. For example, parties can sign the trust document from virtually anywhere. Additionally, the administration of the trust can be done efficiently without the need to use international couriers, provided that one of the parties does not reside in Texas. However, relying on electronic signatures may have its pitfalls. For example, by using electronic signatures, the parties waive the "wet" signature guarantee, and the parties have very little recourse if someone replaces the terms of the trust document electronically. Furthermore, each party will need the other’s electronic signature identification number, which may not be feasible if the parties do not reside near each other. Electronic signatures are acceptable in the context of trusts. As a best practice, parties using electronic signatures should ensure that the electronic documents meet the Bureau of Electronic and Digital Signature Standards issued by the Texas Secretary of State.
Ensuring Your Trust Signature Fulfills Legal Requirements
Successfully executing trust documents requires meeting the signature requirements of the law, including signing in front of witnesses or getting a trust document notarized. Oftentimes, even if the signature requirement is not particular, trusts profess to follow the statutory signature requirements for wills, and this means that generally, trusts must be signed by the trustor and two witnesses.
Trust signature requirements are vital to ensure a trust can be admitted to probate and is valid. Because trusts avoid probate, they usually do not need to be admitted to probate. Nonetheless, if a trust is challenged it will need to be admitted to probate and subjected to a contest on whether it meets the signature requirements of some trustors and some other states. While not every state has adopted the Uniform Trust Code and therefore does not have any signature requirements, far more states that have adopted the Uniform Trust Code do apply signature requirements and most states’ signature requirements are similar to those for wills. Absent an obvious typographical error, if the signature requirement is met for a will, the signature requirements of the Uniform Trust Code are probably met.
The preferable way to ensure compliance with trust signature requirements is to sign in front of two witnesses. If the trustor is not mentally competent, then a second witness would also be required to consider capacity.
Case Precedents: Legal Challenges Related to Trust Signatures
In New Hampshire, we have had a number of cases involving trust signature disputes that highlight the issues at hand regarding trust signatures and trusts. In these cases, the structures and resident trust laws of other states of prior residence play into the requirements for a trust signature and the capacity requirement for signing.
The first case arose in the Massachusetts Land Court in 2010, Mass. L.C. No. 10,115, entitled Appeal of the Decision of @Adderbury, LLC, In the Matter of the Prohibition of Registration of Documents by @Adderbury, LLC, In the Registry of Deeds for Bristol County, Southern District.
In this case, benefits were to be paid out from a trust to a grantee. However, issues arose concerning the signature of the trustee required to transfer real property out of the trust. The issue was whether a Massachusetts statutory requirement for a trust signature that the trustee be a Massachusetts resident applied to the Massachusetts land records and/or to the real estate held in that Massachusetts trust that was located in S NH.
The court found that based on the language of the statute and related provisions, that the registration of deeds provisions were designed to implement, and were limited in their application to, the land records in Massachusetts. The court found that the signature requirements for a Massachusetts land record are not necessary for registration of documents concerning property located out of state and that the trust signature issue for New Hampshire property should be resolved under New Hampshire law.
As such, the court looked at RSA 564-B:7-725(f)(2) to determine whether the Massachusetts trustee was permitted to do business in NH and was, therefore, an authorized trustee. We might not have been able to solve this issue without the signatures of co-trustees who were residing in NH, so having another NH trustee would have been beneficial .
However, the outcome of this case clearly establishes that the signature requirements for a Massachusetts land record shall not apply to a New Hampshire deed, nor should they apply to the deed in this case since a conflict with the authorization language of RSA 564-B:7-720(f)(1)(C). The Massachusetts Land Court also held that it could not look at the substantive issues of the signature requirements of the Massachusetts trustee.
In another case, a 2012 New Hampshire Superior Court probate case, entitled Marjorie Mills & Frances Mills Trust, Docket No. 219-2012 E-06909, the issue involved the signature requirements of a Massachusetts trustee on a deed and appointment of commissioner. The case held that the presentment of a deed to land with the joinder of the other grantors "is sufficient", even though the statute requires that Martha Mills "swear and execute" that she "will faithfully and impartially perform the duties" of her position, as Trustee of the Mills Family Trust. The Mills Family Trust was a Massachusetts trust which involved properties in NH. Martha Mills, the Massachusetts trustee, "executed" and acknowledged the deed both in her capacity as trustee and individually.
The court held that because of the joinder of the other grantors, there was no prejudice to any parties and that the "requirements of the statute were sufficiently satisfied so as to prevent any change in ownership or interest of the named property."
It was clear to the court that the relationship between the Mills Family Trust and the Mills Family Limited Partnership was the primary reason the Massachusetts trustee signed "in her capacity as Trustee". Thus, the Court concluded that it is clear that "the statute made no change or impairment of title to the property owned by the New Hampshire LLC and the New Hampshire LLC is in privity with the grantors, which includes Martha Mills in her capacity as Trustee of the Mills Family Trust."
At the end of the day, the Mills Family LLC was the owner of the real estate, and the court also found that the New Hampshire Trustee Act governed the actions of any trustee in NH.