One of the most common reasons cited for creating an estate plan is to avoid probate. While it is true that a well drafted and properly funded Trust can avoid probate, there are instances where even a well drafted Trust can end up in court. A Successor Trustee has a lot of responsibilities upon the death of the Trust’s creator. When an individual dies, creditors need to be ascertained; assets need to be marshalled; and when there are collectibles and/or real property, assets need to be appraised and distributed in kind or after they are liquidated. It is a time-consuming process that requires an impartial and motivated trustee. The main benefits of doing all of this within a Trust, as opposed to a probate, include avoiding the delays of court proceedings and avoiding the court costs and compensation due the Executor and the Executor’s attorney, which are set by statute. However, if the Trust names a Trustee who is not willing or able to fulfill these tasks or perhaps worse yet, names two or more trustees who are unable to work together to administer the Trust, the beneficiaries or co-trustees often turn to the court for assistance to remove the trustee or resolve disputes between co-trustees.
COST OF COURT INTERVENTION
Court intervention to seek the suspension or removal of a trustee or to resolve disputes between feuding co-trustees are expensive and can often cost the Trust and ultimately the Trust beneficiaries more money, in attorneys’ fees and court costs, than a probate. Most Trusts allow a Trustee to pay his or her attorney from the assets of the Trust as long as the representation is for the benefit of the Trust and the beneficiaries, which becomes another issue to litigate.
If a beneficiary is trying to compel a Trustee to fulfill his or her obligations as Trustee, it may be clear to the beneficiary that the Trustee has breached his or her duties, but it takes actual evidence, several months and sometimes years of litigation to have a Judge reach that conclusion. If the Judge agrees with the petitioner, and the Trustee is a beneficiary or has personal wealth, the petitioner may be able to obtain an order against the Trustee individually or surcharging the Trustee’s share of the Trust for the petitioner’s attorney’s fees and also get an order that the Trustee’s attorneys’ fees and costs are likewise charged/surcharged to the misbehaving Trustee.
While there are statutes and case law that allow for an order to recover attorneys’ fees and costs and most litigators include a request for fees and costs to be reimbursed, the cold hard truth is they are rarely awarded. The courts are inundated with “family feuds” with Trustees who are not living up to the expectations of Trust beneficiaries. Despite the authority for charging/surcharging a bad Trustee, the court often follows the American Rule that each side pays their own fees. As unfair as it seems, a beneficiary who is seeking court intervention in a dispute with a Trustee can be faced with paying 100% of their own attorneys’ fees and a share of the Trustee’s attorneys’ fees proportionate to their share of the Trust…even if the beneficiary wins his or her case. If it’s a situation with feuding co-trustees, a beneficiary can have their share in the Trust reduced to pay for the attorneys’ fees of each of the feuding co-Trustees.
PLANNING FOR SUCCESS
In fifteen years of handling Trust and Estate litigation, I have seen many cases where the choice of a different Successor Trustee could have avoided litigation. One of the most obvious issues involves the Trusts that name co-Trustees. Trusts that name two or more of the creator’s children as co-Trustees are often an effort to save a post-death fight between siblings who do not get along. This is setting that Trust up for litigation from the start. If adult children do not get along while you are alive and well, there is little or no chance that they will be able to work together as co-trustees when the time comes.
Similarly, choosing a Trustee who is also a beneficiary can sometimes create issues if there becomes a dispute amongst the beneficiaries. For example, if there is a family home that one or more of the beneficiaries want to sell and others want to keep. In balancing his or her preferences, a Trustee who is a beneficiary could be faced with a conflict that violates his or her duties as a Trustee.
While these disputes are not always avoidable, they are more often than not preventable. A skilled estate planning attorney can help their client to understand the responsibilities of a Trustee and choose an individual who not only is able to fulfill the obligations of a Trustee, but willing to act as Trustee. Taking the qualifications of the proposed Trustee into consideration and having a conversation with that person before nominating them to act as Trustee can help to achieve your goal of avoiding court proceedings to settle your estate on your death.
CANNON LEGAL FIRM CAN HELP
Attorney Dana M. Cannon and Cannon Legal Firm proudly serve Seal Beach, Long Beach and the surrounding communities for all your Estate Planning, Trust & Estate Litigation, Trust Administration and Probate needs. Contact us for a free consultation or schedule a Zoom or telephone appointment online. Dana@CannonLegalFirm.com – 562.543.4529 (Voice and Text) – www.CannonLegalFirm.com