After her sister Lou died, it fell to Maxine Gilliam to take care of her niece. Maxine became the successor trustee and took on the most rigorous fiduciary duties known to the law.

The vast responsibilities of the job included fixing up the home occupied by her niece, the trust’s sole beneficiary. Maxine got a cash loan from a private real-estate investor to pay for repairs to the house.

When she later took a look at the loan’s fine print, she saw its disclosure notifications were different than the terms stated on the loan documents—leading her to think the final payment date was a year later than the one indicated in the loan documents. Maxine filed suit, claiming the lender violated state and federal consumer-protection laws, including the Truth in Lending Act (TILA). A district court dismissed her complaint, buying lender Joel Levine’s argument that this loan was not a consumer-credit transaction because Maxine didn’t live at the trust’s residence. Maxine appealed.

The Ninth Circuit Court of Appeals reversed the dismissal and reinstated Maxine’s complaint, finding that no law supported the lender’s argument. It found that controlling federal law provides that “credit extended for consumer purposes to certain trusts is considered to be credit extended to a natural person rather than credit extended to an organization.” These “certain trusts” include those created for tax or estate-planning purposes. The ruling stated that Maxine’s loan to fix the trust beneficiary’s residence was for personal, family, or household purposes and met TILA’s definition of a consumer credit transaction.

If family loan documents leave you wondering who’s responsible, contact a reputable estate lawyer to figure out who is on the hook. Gilliam v Levine, No18-56373 (9th Cir 2020).

About the Author:

John O’Grady leads a full-service estate and trust law firm in San Francisco. His practice includes estate planning & administration, probate and trust litigation.