Who Pays the Fees in Trust and Estate Litigation?

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Who Pays the Fees in Trust and Estate Litigation?

Generally those fees come from the property and resources in the will or trust, not out of the pockets of the people named to be responsible for those assets and how they are spent.

Following the death of a person who created a will, the person named in the will as an executor (male) or executrix (female) will be name named by the probate court the personal representative of the estate. In the case of a trust, the person in charge of maintaining the funds and distributing them is the trustee, no court involvement is needed. That personal representative must carry out the wishes of the deceased, the trustee needs to carry out the wishes of those who established the trust.

How legal fees and costs are normally paid.

It’s not unusual that someone either not named as a beneficiary, or named as a beneficiary but unhappy with what, or how much, he or she received, will file a legal action in probate court challenging the validity of the will or trust or challenge the actions of the personal representative or trustee as improper or illegal.

Given the high costs of litigation, this could strike fear in such a defendant. It should not cause fear because that person will not have to pay to defend the case out of his or her personal resources, but since the fees could come out of the estate or trust there should be fear that a long, protracted legal battle could significantly drain resources meant for beneficiaries. A trustee normally uses the trust assets to defend the trust. Attorney’s fees and costs may be advanced by the personal representative of the estate (to be later paid back when funds are distributed) or paid out of the estate’s assets once the conflict has been resolved.

Filing legal claims without merit can be expensive.

These are the general rules and like all general rules in the legal system, there are some twists based on particular situations. One of those situations under California law is when a trust beneficiary files a legal claim that a court finds was baseless and not filed in good faith. Judges view their time and resources, and the time resources of the court system, parties and attorneys involved, as very valuable. If it’s found the legal system is being abused because a legal action has been filed not based on a valid claim, but based on a personal vendetta or to seek vengeance due to some perceived injustice, a judge can become very unhappy or angry (a situation which should be avoided if at all possible) and can seek some vengeance of his or her own.

Such is the case of Estate of Ivy (1994) 22 Cal.App.4th 873 [28 Cal.Rptr.2d 16]. The decedent L.O. Ivey set up a trust in his will. Sharon Purcell DiLeonardo was a one-sixth beneficiary of the income of the trust. She objected to how the trustee was spending the trust’s money by objecting to one of its accounts. Probate court found the objection lacked merit and she appealed. The trial court determined that Ms. DiLeonardo’s claims lacked merit, were frivolous and filed in bad faith. The court also sanctioned Ms. DiLeonardo for not complying with discovery requests (not providing documents as requested, which if not done for good cause can also make a judge very unhappy or angry).

The trial court ruled that instead of allowing the defense costs to be taken out of the trust as a whole (unfairly taking money away from the three other beneficiaries), given Ms. DiLeonardo’s actions, these costs would be taken out of her share of the trust. The legal fees and costs of the three other beneficiaries and the trustee came to $350,516.

Given how much was at stake, Ms. DiLeonardo appealed and state appellate court decided against her. They found no grounds to overturn the trial court’s decision and upheld the fact her share of the trust would be docked to pay the legal bills incurred due to her frivolous lawsuit and failure to comply with discovery requests.

If you are a trustee or personal representative or someone considering challenging a will or trust, it’s important that you understand how probate litigation works, the cost and how those costs are paid and by whom. If you are the trustee and need help defending yourself in a trust or estate litigation dispute, contact my office.