June 29th, 2023 in
Following the death of a person who had implemented a trust document to dispose of their estate, the trustee may face unexpected claims or allegations from beneficiaries. Trustees have a solemn fiduciary duty when administering a trust. The term “fiduciary duty” refers to the relationship between the fiduciary and the beneficiary on whose behalf the fiduciary acts. A trustee has the duty to accept legal responsibility for providing a duty of care, loyalty, good faith, and confidentiality while always serving the beneficiary’s best interests. In addition, the trustee must follow the dictates of the trust instruments while looking out for the trust’s beneficiaries.
Conflicts may arise over the language used in the trust, there could be questions regarding the trust’s validity, or one or more beneficiaries could make allegations about your actions as trustee. For example, a beneficiary may claim you failed to provide trust documents to the beneficiaries, properly communicate with the trustees, or give a full accounting of the trust to the beneficiaries. Such an accounting will include any payments made from the trust, revenues received, and records of assets and liabilities. As a trustee, you are held to the highest legal standards and can be sued for various reasons.
You may have questions regarding how to proceed—and how to pay for your attorney fees when you are facing allegations connected to your administration of a trust. For the most comprehensive, experienced trust defense in California, speak to a knowledgeable attorney from Steburg Law Firm. We are both experienced estate planning attorneys and highly skilled litigators. This experience works in your favor at every turn.
When Can Trustees Use Trust Funds to Hire Lawyers?
Suppose you, as the trustee, are facing allegations of wrongdoing by a beneficiary, creditor, or other party. In that case, speaking to an attorney from Steburg Law Firm can be extremely helpful. For example, perhaps a beneficiary feels the trust is not operating as it was meant to, or you have a co-trustee who has a problem with how you manage the trust.
Generally speaking, when a trust is sued, the trustee may use trust funds to defend the lawsuit—even when the trustee is sued. Litigation can be expensive, and as the trustee, you have the authority and discretion to advance the cost of legal assistance from the trust. Of course, the hope would be that the money advanced for legal fees would eventually be recovered during the litigation process.
There are exceptions to this rule, however. While you can recover any legal fees for litigation required to defend the interests of the trust, there are exceptions. For example, if you are found to have engaged in negligence or misconduct that resulted in a lawsuit against the trust or a lawsuit to remove a trustee, reimbursement for legal fees could be denied. For legal expenses to be denied, the court would first have to establish that you actually engaged in misconduct, including:
- There was a failure on your part to take care of the trust assets.
- You purposely ignored the intent and language of the trust.
- As a result, assets were diverted from the trust for your personal use.
- You exhibited favoritism to one beneficiary over the other in your role as trustee.
- There was a failure on your part to look out for the best interests of the beneficiaries consistently.
- You engaged in behaviors that created a conflict of interest with the trust.
Remember that because allegations of misconduct have been made against you, you are not automatically prevented from using trust funds for your legal fees. However, the accusing party or parties must establish that you engaged in misconduct or harmful acts or did not have the best interests of the beneficiaries at heart to prevent you from seeking reimbursement for legal fees. In some cases, the trust document itself will provide guidance on how and when a trustee’s attorneys’ fees incurred on behalf of the trust administration can be reimbursed.
How Can Steburg Law Firm Help You With Your Trustee Defense in California
The role of the trustee can be complex. You may be forced to defend yourself against claims that have no merit. The estate litigators at Steburg Law Firm have extensive experience dealing with claims of trustee mismanagement and can help you through this difficult time. We vigorously defend trustees from removal actions, helping you provide a comprehensive accounting of trust funds and assets. We will assess your specific situation, then help you explore your options and resolve the matter in the best way possible. Contact Steburg Law Firm, P.C. today.