Who Pays Legal Fees in a Trust Dispute?
A common question regarding trust litigation concerns the payment of legal fees. Who pays legal fees in a trust dispute? If you become successful in litigation, you may be right to assume that the unsuccessful party will reimburse legal fees or that trust assets will be used for attorney fees.
Legal Fees on a Trust Dispute
About Trust Disputes
Disputes between beneficiaries or trustees may result from misunderstanding or contravention of the terms of a trust.
Hess-Verdon trust attorneys are available to help both beneficiaries and trustees on issues such as:
· Claims against or by trustees
· Trustee disagreements
· Disagreements between beneficiaries;
· Getting a trustee removed;
· Trust management issues.
Power vs. Might
Beneficiaries may not have the resources to pay legal fees to protect their rights. Consequently, beneficiaries are disadvantaged compared to trustees, who have more lawful grounds to finance litigation using trust assets. Trust beneficiaries worried about a trustee raiding the fund for legal fees have a few options:
· The beneficiary should consider “locking up” or obtaining a court order through which to make the trust inviolable
· In addition, the litigation documents can include a request for the court to order the trustee to reimburse the trust for legal fees
Trustee Legal Fees
Trustees have the legal freedom to use money from the trust for necessary expenses in administering the trust. These include legal fees to protect the trust against malicious litigants. But if, as a trustee, you are unsuccessful in defending claims such as breach of fiduciary, the courts may decide that it was improper to take your legal fees from the trust. You will have to reimburse it.
In contrast, the courts may also find you at fault for not hiring a trust lawyer to effectively defend and protect the trust’s assets from bad faith litigants.
California Probate Code 859: Trustees are awarded attorney fees if the courts establish that the defendant stole or wrongfully used money/assets belonging to a minor, an adult-dependent, trust elder, or conservative.
California Probate Code 15642(d): The courts will award legal fees if it determines that a beneficiary’s petition to remove the trustee is malicious and that ejecting the trustee would contravene the grantor’s intentions.
California Probate Code 17211: Beneficiaries cannot oppose accounting and other essential duties in administering the trust. If a beneficiary challenges trustee responsibilities in bad faith, the trustee may be awarded attorney fees deducted from the contestant’s share of the trust.
Beneficiary Legal Fees
California Probate Code 17211: Trustees must regularly audit and report the finances of the trust. Following a beneficiary’s request for the books, if a trustee opposes the accounting with malicious intentions, the courts award legal fees to the beneficiary petitioning the case.
In that case, the trustee will have to pay for the legal fees in the trust dispute using money from their income as trustee or their share of the trustee in the case of a trustee who is also a beneficiary. If that amount is not enough to cover legal fees, the trustee will have to foot the bill out of pocket.
California Probate Code 16061.9(a): Trustees must notify when trusts become irrevocable or before distributions. If a trustee doesn’t comply, they will pay for attorneys’ fees unless they make a reasonable argument. California Probate Code 19255(e): When a decedent leaves a trust, his/her creditors may file claims. The trustee can accept or reject the claims. In case the creditors win, the trustee pays the legal fees.
California Probate Code 15645:
If the trustee refuses to turn over the administration to a successor trust company as required by beneficiaries, the courts can award legal fees to the petitioner. The trustee will have must to the legal fees as ordered by the court. Leader v. Cords, (2010) 182 Cal.App.4th 1588: California Probate Code 17211 (described above) was interpreted. A beneficiary recovered legal fees from a trustee who unfairly withheld distribution if the court finds the trustee’s conduct unreasonable or malicious.
Estate of Ivey, (1994) 22 Cal.App.4th 873: This case involved a beneficiary who objected to a trustee’s accounting who made frivolous and fraudulent objections. According to the court, paying legal fees from the trust would not be in the best interests of the other income beneficiaries. Both the trustee and other beneficiaries received fair and reasonable compensation for their expenses and lawyer’s fees. The court directed the trustee to reimburse them from the petitioner’s future trust distributions.
Contact Hess-Verdon if you have questions regarding attorney fees or if you’ve been threatened with a lawsuit and asked that you pay for their attorney’s fees.
About Hess-Verdon & Associates, PLC
Hess-Verdon is in Newport Beach. We have 30 years’ experience in estate planning law. We have helped many clients protect their estate, grow their estate, and pass it down to their loved ones through various legal instruments.
Our estate lawyers can help you administer or contest a trust or will. We also have expertise in business law and elder abuse law. Expect personalized services that put you in control. Contact us today at 949-706-7300
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