Perhaps the most common type of California Living Trust litigation involves a misbehaving trustee or successor-trustee. Buffington Law Firm’s trust litigation team has dealt with many trust litigation cases involving California Living Trust trustees who fail or refuse to perform their duties to the disadvantage of the living trust beneficiaries. Sometimes a trustee will fail or refuse to communicate or provide information to trust beneficiaries about what he or she is doing concerning the trust. Sometimes the trustee refuses to make distributions of trust assets as specified in the trust. Not infrequently a misbehaving trustee comes to regard the trust assets as his or her own, and only grudgingly makes small, inconsequential distributions or perhaps none at all. When this happens the beneficiaries need legal representation. The law provides remedies for this kind of trustee misconduct. Often the first step in such litigation is to bring a Petition to Compel Trust Accounting in order to discern precisely what the trustee has been doing with trust assets. A Trust Accounting petition can be an effective way to shed light on a trustee’s activities.
Under California Probate Code Section 17200 a beneficiary or other “interested person” can bring a Petition within the Probate Department of the Superior Court asking a Court to order a misbehaving trustee in a manner that remedies the applicable bad conduct. Once the beneficiaries bring their Petition the Probate Court will set a hearing date and decide the matter. This is essentially an evidentiary trial. The basic rule is that the Trustee can pay his or her attorney’s fees out of Trust assets while beneficiaries, initially at least, must front their own attorney’s fees. While this seems to tilt the playing field in favor of the trustee (and it does) there are remedies for this.
If the Trustee has failed and refused to do an accounting, or if the accounting shows that the Trustee has breached his or her duties in some way, in many circumstances the trial court may and should award attorney’s fees to the petitioning beneficiary. For example, if a trustee is found to have unreasonably failed to make distributions of trust assets, the petitioning beneficiaries may be awarded his or her attorney’s fees for having to bring court action to compel distributions. This was established in Leader v. Cords [182 Cal. App. 4th 1588 (2010)] . Leader essentially holds that when a trustee in bad faith refuses to make a beneficiary distribution and opposes a Petition to Compel Distribution, the action is related to an account and falls within Probate Code §17211(b) which provides for an attorney’s fees award to the petitioner. The Court of Appeal reversed the trial court and found that the statute (17211) is remedial in nature and accordingly must be construed liberally to protect beneficiaries. The Court of Appeal in Leader, supra notes that normally, “… trust beneficiaries must ordinarily pay their own attorney fees in challenging the trustee’s conduct, even when they are successful.” The Court goes on to state that “[i]f a beneficiary contests the trustee‘s account and the court determines that the trustee’s opposition to the contest was without reasonable cause and in bad faith, the court may award the contestant the costs of the contestant and other expenses and costs of litigation, including attorney’s fees, incurred to contest the account. [Leader, supra at 1595-1596].
The Leader holding provides a petitioning beneficiary with powerful leverage with respect to recouping attorney’s fees expended in a California Living Trust petition and goes a fair distance towards leveling the playing field between trustee and petitioning beneficiary.
If the trial court finds that the trustee has breached his or her fiduciary duties, it may disallow attorney’s fees that the trustee previously charged to the Trust. Thus, the playing field is not as steeply tilted towards a trustee as it first appears.
If you have an issue with a misbehaving trustee, or if you are a California living trust trustee who is the subject of unwarranted claims from beneficiaries, Buffington Law Firm invites you to call for a Free Legal Consultation. All consultations are protected by attorney-client privilege and are with an experienced California living trust litigation attorney. Call us today!
by: Roger J. Buffington