Trust Litigation: A
Comprehensive Guide For
Trust Beneficiaries

By the time you finish reading this guide,

you will know if you need to begin trust litigation and

what you can expect to get from trust litigation.

Trust Litigation: Our Guide To Taking Action

Losing a loved one is hard. We are here to help.

Are you a trust beneficiary who has not received your rightful inheritance from a trust?  Are you tired of dealing with a lazy, incompetent, or untrustworthy trustee?  Maybe you’re a trustee who believes property was wrongfully taken from the trust, has to work with a difficult co-trustee, or facing unreasonable demands from a trust beneficiary. 

Here at The Grossman Law Firm, A.P.C. we have represented beneficiaries seeking their rightful inheritance, trustees who are working to protect beneficiaries, and people who need to do probate in California probate court for over 20 years. We know how important it is for you to know what you can and can’t accomplish in trust litigation, whether trust litigation is right for you, and the duties a trustee has to you as a trust beneficiary.  By the time you finish reading this guide, you will know whether you need to begin trust litigation and what you can expect to get from it.

Chapter 1

What Is Trust Litigation?

Trust litigation is a lawsuit filed by a beneficiary against a trustee or a third party or by a trustee against a beneficiary or third party.  A trust beneficiary is a person who is entitled to receive property (i.e. cash, real estate, stocks, bond, mutual funds, jewelry, etc.) from a trust.  The trustee is the person named in the trust to be in charge of the trust estate.  The trust estate is all the property, of whatever kind, owned by the trust.  The trustee has the legal authority to act on behalf of the trust.

The purpose of a trust litigation lawsuit is to obtain a beneficiary’s rightful inheritance. Trust litigation can also be a lawsuit filed by a trustee to reclaim property that rightfully belongs to the trust or to have the court rule on the properness of the trustee’s acts. Learn more about what you are getting into with our article, "The Timeline Of A Trust And Estate Lawsuit." 

When a trust beneficiary begins trust litigation it’s usually for one or more of the following reasons:

  • To compel the trustee to provide a copy of the trust
  • To obtain financial information from the trustee
  • To have the court instruct the trustee to perform a certain act
  • To have the court instruct the trustee to account
  • To reclaim property that rightfully belongs to the trust
  • To suspend the trustee’s powers
  • To remove the trustee
  • For damages against the trustee
  • To appoint a temporary trustee
  • To appoint a successor trustee

The Difference Between a Will and a Trust

It’s very common for people to interchangeably use the terms will and trust. But a will is not a trust and a trust is not a will. They are two different documents that govern separate legal entities.

A will is the document which states who will be in charge of a probate, who gets the property (and on what terms), and who will be in charge of the probate estate. This requires filing the petition for probate, a number of supporting documents, and an order from the probate court appointing the executor of the probate estate. The executor is the person who is in charge of the probate estate.

A trust is usually created to avoid probate. The settlor (that’s the person who created the trust) titles their property in the name of the trust. The trustee is the person in charge of the trust. Trustees nearly always have many more powers and a great deal more flexibility than an executor. When the settlor dies, the assets in the trust will be administered and then distributed according to the terms of the trust.

A probate and a trust are two separate and different legal entities. Assets in a trust do not go through probate. Any assets the settlor failed to title in the name of the trust may go through probate.

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Chapter 2

Why Start Trust Litigation

There are many different reasons that you as a trust beneficiary may start trust litigation. The common element for all of them is that you have a reason to distrust the trustee or can’t communicate with the trustee. 

Many people, when they learn their loved one has died, will turn to the person they believe is the trustee and request a copy of the trust. Seems simple enough, but sometimes you might find yourself in a situation where this doesn’t happen and litigation becomes the next step. Some of the problems leading to trust litigation include are:

  • When the trustee doesn’t respond or refuses to provide a copy of the trust, it is usually necessary to start trust litigation.
  • When a trustee doesn’t respond to requests for financial information or refuses to provide any financial information it’s time to start trust litigation. 
  • When the trustee has been administering the trust for a year or longer and refuses to account or promises to account but fails to actually do it, then it’s time to begin trust litigation. 
  • When a trust beneficiary becomes aware that a trustee is either taking trust assets to which they’re not entitled or using trust assets to benefit themselves, family, or friends, then it’s time to start trust litigation.

In order to decide if you need to engage in trust litigation, make sure you know the difference between trust litigation and probate litigation.

Trust litigation versus probate litigation

Just as there is a difference between a trust and a will, there is a difference between trust litigation and probate litigation. Where we work in California, both trust litigation and probate litigation take place in the probate court. They are similar to one another in some ways, but the subject of the litigation is always going to be different.  The reason is because of the differences in a will and a trust addressed earlier. 

Probate litigation involves the people and the property involved in a probate estate. Trust litigation involves the people and the property involved in a trust. A probate estate and the trust estate are two separate legal entities. Even though a person who passed away may have both a probate estate and a trust estate, probate litigation will not directly affect how the trust is distributed and trust litigation will not directly affect how the probate estate is distributed.

Trust litigation versus probate

Trust litigation and probate are two completely different processes that both take place in a probate court. Probate, not probate litigation, is the process of transferring property owned by a deceased person to the people who are entitled to receive that property. Probate is a court-supervised process. Probate on its own does not involve any person suing another person. You can think of it as an extended administrative proceeding that results in title to property being transferred from the deceased person to one or more living people.

Trust litigation only occurs when one or more people sue another person or people. The lawsuit may involve property ownership. But, it can also center on non monetary interests such as directing the trustee’s actions, suspending the trustee, or removing the trustee.

Chapter 3

When to Start Trust Litigation

Now that you understand the key characteristics that define trust litigation, you should have a clear understanding of whether trust litigation is the right route for you. This chapter will focus on the steps you can take if trust litigation is the right path forward.

First, You Need to Get a Copy of the Trust

Getting a copy of the trust after the settlor dies should be straightforward. After learning of the death of the settlor, the trustee is required to send out a notice to all the trust beneficiaries and heirs within 60 days. The notice informs all parties who the trustee is, their address, phone number, and the principal place of trust administration. The notice also informs everyone who receives it that they are entitled to receive a copy of the trust and its amendments if they make a written demand. In some cases, trustees will simply mail out a copy of the trust along with the required notice.

Of course, not all trustees perform all their duties. If you are a trust beneficiary, the trust settlor has died, and you have not received the required notice, then it’s important that you or your attorney make a written demand for a copy of the trust. It is critically important the demand be in writing. 

California’s Probate Code, for example, clearly states 60 days after a written demand has been made, if the trustee has not provided a copy of the trust, then the beneficiary can petition the probate court for an order requiring the trustee to provide a copy of the trust. An oral demand does not satisfy the requirement. A written demand is your key to the courthouse door.

A common misconception is that if a person is not left anything in the original trust or in a trust amendment then that person is not entitled to receive a copy of the trust and its amendments. This claim misunderstands the law. Being an heir of the settlor is what gives a person the right to receive a copy of the trust and its amendments. If you would like a template letter for getting a copy of the trust, check out our article," How to get a copy of a Trust." 

Second, Does the Trust Accurately State the Settlor’s Wishes?

When you receive a copy of the trust you will, of course, read it. The most important question to answer at this time is whether the trust accurately reflects the settlor’s wishes.  If the trust does not reflect the settlor’s wishes, then it is important to consider filing a trust contest.  A trust contest is a specific type of trust litigation. A trust contest is a lawsuit seeking to have the probate court declare the trust void. In other words, to set the trust or trust amendment aside so it cannot be used. The trust contest can be filed attacking the trust itself or one or more amendments to the trust. Further below, you’ll learn the reasons to contest a trust.

If the trust accurately states the settlor’s wishes, then focus your attention on whether the trustee is carrying out the trust terms.

Third, Is the Trustee Carrying Out the Terms of the Trust?

It is important when assessing this that you consider whether the trustee is acting reasonably, not perfectly. California law, for example, does not require trustees to be perfect. It does require trustees to act reasonably when considering the assets in the trust, the trustee's expertise (if they have any), and the terms of the trust.

A commonsense analysis will be right 90% of the time even if you know nothing about trust law. So what does this look like? 

  • A trustee who appears to be doing nothing for no good reason
  • A trustee who appears to be benefiting from trust property
  • A trustee who simply won’t provide you with the information you need to understand what is happening in trust administration are all warning signs that the trustee is in breach of his or her fiduciary duties. 

If you can communicate with the trustee in order to address your concerns, then do it. There is nothing faster, easier, and inexpensive than direct communication between the trustee and the trust beneficiaries.  If you have tried that and it has not worked that it’s time to consider trust litigation. 

I use the word “consider” deliberately.  Like all litigation, trust litigation will require your time, energy, and money. It is important before a single document is filed for you to consider whether the prize is worth the price. If your concern is over a trustee being disrespectful but you can’t identify any monetary harm, then it might be wiser to vent to people in your life rather than filing a lawsuit. If on the other hand, the trustee is causing you significant financial harm, then discussion with a trust litigation attorney would be a good idea.

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Chapter 4

Can a Trust be Contested?

If the Trust Is Incorrect: Trust Contest

If the terms of the trust don't accurately reflect the settlor's true intent, then you will want to consider a trust contest. You can challenge a trust or trust amendment for several reasons, but you can't question it for any reason. In California, for example, you can challenge a trust on any of the following six bases:

1. Lack of Mental Capacity

A lack of mental capacity is referring mental incompetence. Whatever term you use, a trust settlor lacks mental capacity if they are:

  • Unable to understand the nature of the testamentary act;
  • Unable to understand and remember the nature of the trust settlor's situation and property; or
  • Unable to remember the trust settlor's relationship to spouse, children, parents, siblings, and others whose interests are affected by the trust

A settlor is also not mentally competent if they have a mental disorder with symptoms including delusions or hallucinations. That resulted in the trust giving property in a way that, without the delusions or hallucinations, they would not have done.

2. Undue Influence

In a trust contest, undue influence means excessive persuasion that causes the trust settlor to act or refrain from acting by overcoming the settlor's free will and results in inequity. In other words, someone was able to override the settlor's free will to have their thoughts put into the trust.

There is not one standard to prove undue influence. Each case will succeed or fail based on its unique facts. But the court is entitled to consider various factors that indicate the use of undue influence in creating a trust or a trust amendment.

Those factors include:

  • vulnerability of the victim
  • the influencer's apparent authority
  • the actions or tactics used by the influencer and
  • the equity (or inequity) of the result

In other words, someone's influence overrides the settlor's free will. That can cause the property to be left in a way the settlor would not have done if they were permitted to make their own choices.

Most often, undue influence is not proved by direct evidence. That's because it's very unusual for a witness to be present to see, hear, and later testify to the undue influence exerted on the settlor. It is far more common to prove undue influence through indirect evidence. Meaning inferences will have to be drawn from the available evidence.

3. Fraud

For trust contests, fraud is when a settlor is deceived into creating a trust they wouldn't have made in the absence of the deception. Most often, when fraud is alleged, the substance of the claim is either that the settlor signed the trust believing it was a different document. Or the settlor was provided false information about close family members, altering the terms of their trust.

4. Duress 

Duress is proven one of three ways:

  1.  Unlawful confinement of the settlor or the settlor's relative;
  2.  Unlawful detention of the settlor's property; or
  3. Confinement of the settlor using fraud or fraudulently made harassing or oppressive.

I would not recommend spending too much time understanding the nuances of duress. In my entire career, I've never seen a trust contest pursued based on "duress" or coercion.

5. Menace

Menace is simply the threat of duress.

6. Mistake

Suppose the settlor makes a material mistake, so the trust is set aside. In other words, the error must go to the heart of what the settlor meant to accomplish by creating the trust.

If the Trust Is Correct, Keep Your Trustee in Check

Your trustee must communicate with you and keep you informed about the administration of the trust. A good trustee will provide financial information without a formal trust account. Similarly, a good trustee will provide a general plan for the trust administration and explain what is going on as significant events occur.

Suppose your trustee communicates well and provides you with a reasonable amount of information. In that case, it's unlikely your trustee is misbehaving. Even if this is the case, it will be important that your trustee provide you with a formal trust account. Or all the relevant underlying financial records to determine for yourself if your trustee has acted correctly.

You have to decide what type of trustee you are dealing with and what is the best method for addressing this situation. If your trustee won't communicate with you or won't provide you with financial information, then that's a warning sign. Trustees who won't share or provide information most of the time won't do so because they are lazy, incompetent, or stealing from the trust.

Suppose you have a lazy or incompetent trustee whose laziness or incompetence is causing financial harm. In that case, you'll want to address it sooner rather than later. Handling and managing this as quickly as possible is essential if you believe you're dealing with a trustee stealing from the trust. You don't want to allow trust assets to be spent, hidden, or dissipated. Taking action is your best action.

In the next section, you'll learn about the trustee's duties. The duties govern what a trustee must do and form the basis for a lawsuit if the trustee fails to carry out their duties.

Chapter 5

Trustee’s Duties

Every trustee has duties to all the trust's beneficiaries. A breach of one or more of these duties can get you equitable relief or damages.

If you would like to look more in depth to your Trustee's duties, check out our article, "19 ways your Trustee can be breaching their fiduciary duties." Or look at part of our list of the most commonly breached trustee duties that become the subject of trust litigation.

Trustee's Duty to Administer Trust According to Its Terms

The trustee must administer the trust according to the terms of the trust. That means the trustee does not get to make up their own rules. Instead, the trustee must carry out the terms of the trust as recorded.

Common examples of trustees departing from the trust's terms include trustees who want to keep trust property in the trust instead of distributing it. Or trustees who have a wild idea about how they will increase the value of trust assets before they distribute them. That means trustees claimed they received verbal instructions from the settlor before death.

If your trustee fails to administer the trust according to its terms, they have breached their fiduciary duties. 

Trustee's Duty of Loyalty 

Your trustee must administer the trust solely in the interest of the trust beneficiaries. If your trustee uses other considerations to administer the trust, then the trustee is breaching its fiduciary duty to you.

Common examples of trustees breaching their duty of loyalty include

  • The trustee who wants to extend trust administration to increase their fees,
  • Trustees who attempt to take some portion of the trust for themselves that they are not entitled to, and
  • Trustees who make gifts of trust assets to people who are not in the trust or beneficiaries.

Trustees who breach their duty of loyalty often claim that their actions are justified by some verbal instruction from the settlor before they die or from one of the beneficiaries. That is almost always utter nonsense. Even if it were true, that doesn't relieve the trustee of their duty of loyalty to the beneficiaries.

Suppose your trustee truthfully claims that before the settlor died, they said they wanted to make a gift of cash to somebody who isn't a trust beneficiary. Even if it's entirely true, the trust terms became irrevocable when the settler died. For that reason, the trustee must follow the terms of the trust as it appears in writing.

That means if it is not in the trust, it is not the trustee's responsibility since the settlor never wrote it in the trust document. 

The trustee does not get to make a gift simply because there was some verbal instruction. To make that gift is a breach of the trust terms and the duty of loyalty to the trust beneficiaries.

If your trustee is not acting in the best interest of the trust beneficiaries, they have breached their fiduciary duty. 

Trustee's Duty to Deal Impartially with Multiple Beneficiaries

If a trust has two or more beneficiaries, then the trustee must deal impartially with them. The trustee must act impartially with the beneficiary when investing and managing the trust property. The trustee must take into account the differing interest of the trust beneficiaries.

The real question you should be asking yourself is whether the trustee has taken your best interest into account when deciding what to do. A shorthand way of thinking about this is that if the trustee shows favoritism to one beneficiary over another, they have breached their fiduciary duty. There are many ways this can play out depending upon the terms of the trust.

A typical example of a beneficiary being treated differently is when the trust calls for outright distributions, and one beneficiary receives a distribution. At the same time, the trustee retains property in the trust that would otherwise go to the other beneficiaries.

Here are four examples of a trustee taking advantage of a beneficiary. 

  1. When trust assets are managed for some extended period 
  2. The beneficiaries have different ages 
  3. They have other investment goals 
  4. Different risk tolerances 

The trustee's failure to segregate the assets into different shares for the different beneficiaries or, in some other manner, invest the trust property in meeting the goals of each beneficiary is a breach of their fiduciary duty.

Trustee's Duty to Avoid Conflicts of Interest

The trustee has a duty not to use or deal with trust property for their profit or any other purpose unconnected with the trust. The trustee may not participate in any transaction in which the trustee has an interest against the best interests of the trust beneficiaries.

That means that in practice, the trustee cannot use trust property to benefit themself. 

For example, the trustee may not lend her trust cash to purchase real estate. That's an example of using trust property for the trustee's profit.

Occasionally, a trustee will use trust property for what they consider a charitable purpose. In truth, that charitable purpose usually involves helping one of their family members. So, for example, if a trustee wanted to allow their child to live in a trust-owned house without paying rent. Then the permitted trustee overrode their fiduciary duty. 

That is a conflict of interest they are obligated to avoid.

Trustee Requiring Beneficiary to Relieve Trustee of Liability as Condition for Making a Distribution

The trustee may not require a trust beneficiary to relieve the trustee of liability as a condition for making a distribution to the beneficiary if the trust's terms require the distribution. In other words, you can't be made to give up your right to sue the trustee as a condition of the trustee distributing your share of the trust to you. There is a big difference between a trustee who requests a waiver of liability and one who demands a release of liability before making a distribution. A disclaimer of liability means you are giving up your right to sue. A trustee can request a liability waiver so they don't have to go through the time and expense of filing an account with the probate court.

Trustees acting in good faith provide a copy of their account to the trust beneficiary, allowing the beneficiaries adequate time to review the statement. And ask any questions they may have about what has been reported in the account. If this sounds like your situation, then your trustee most likely isn't doing anything wrong by requesting a liability waiver.

You might think of this as a shakedown, and you're in a good reason for thinking so. That is very different from a trustee who insists they will not distribute any trust property to you without you signing a liability waiver. That is entirely improper. A trustee who does not share financial information with you and does not allow you to ask accounting questions might as well be waving a red flag. 

If your trustee requires a waiver of liability before making your trust distribution, then your trustee has breached their fiduciary duty to you. 

Trustee's Duty to Not Knowingly Become a Trustee of Another Trust with an Adverse Interest

Suppose the trustee takes on an adverse claim. In that case, the trustee must eliminate the conflict of interest or resign as trustee when the contest is discovered. The trustee of one trust has a duty not to knowingly become a trustee of another trust with an adverse interest to the beneficiaries of the first trust.

That rarely comes into play except in one particular situation. Let's say a couple has created what's commonly known as an A-B trust. Usually, the surviving member of the couple becomes the successor trustee when their spouse dies. The surviving spouse has a duty under the terms of the trust to allocate trust property to the two trusts. That doesn't always happen. Worse, it's not uncommon for the surviving spouse to put all the property into the A trust (the trust that should hold only the surviving spouse's share of the property). And nothing in the B trust (the trust that should keep the deceased spouse's share of the property.) 

When the beneficiaries of these two trusts are not identical, the beneficiaries of Trust B have an adverse interest in the heirs or beneficiaries of Trust A.

Suppose the same person is the trustee of both trusts. They are acting as trustees of a trust with an adverse interest. 

That is an uncommon scenario but not an unknown scenario. When it does arise, it almost always happens in blended families. If this is your situation, you must discuss it with the trust litigation attorney.

Trustee's Duty to Control and Preserve Trust Property

The trustee must take reasonable steps under the circumstances to take and keep control of and preserve the trust property. This fiduciary duty is just as straightforward as it sounds. Yet, any number of trustees failed to carry it out.

Reasonableness, of course, depends on the circumstances a trustee encounters when they take over the trust administration. A trustee must go through administrative steps to take control of trust property. For example, a trustee either needs to record an affidavit of the succession of trustee or record a new deed to show that they are the trustee who holds title to a parcel of real estate. Similarly, a trustee will need to go to a bank to sign new account documents to take control of an existing bank account owned by the trust.

Unfortunately, not every trustee exercises even the minimal effort necessary to take control of trust property. In most situations, it requires only a tiny amount of work for a trustee to take control over trust property. A trustee who fails to control a bank account may find that it has been transferred to the state because the account has been dormant too long. A trustee who fails to exercise control over real estate may find that squatters occupying the property have vandalized or is even the subject of an adverse possession lawsuit.

Common sense will tell you what a trustee should be doing. Once the trustee has taken control of the trust property, they must act reasonably to preserve it. For assets like bank accounts, almost no work is required. The trustee must receive the monthly statements to ensure the funds remain in the account.

Suppose the trust contains stocks, bonds, or mutual funds. In that case, the trustee will have to decide whether the current investment should remain in place or be sold because of the risk inherent in the asset and the proper way to reinvest those assets. For trust-owned real estate, the trustee has to take more active measures. Real estate needs to be insured, real estate taxes need to be paid, and the real estate itself has to be managed.

Trustee's Duty to Make Trust Property Productive

The trustee must make the trust property productive under the circumstances and in furtherance of the purposes of the trust. Simply put, a trustee must examine why the settlor created the trust. For example, suppose the trust calls for outright distribution upon the settlor's death. In that case, the trustee may do very little to make the trust property productive because their primary responsibility is to transfer the property out of the trust to the beneficiaries.

Contrast that situation with the trustee knowing trust property will have to be managed for years. Consider that the trust contains an unoccupied single-family residence. In that case, the trustee must decide how to make that property productive. The trustee could rent the property and collect rent. The trustee could sell the property and reinvest the net proceeds of the sale. What the trustee can't do is allow the house to remain unoccupied.

Trustee's Duty to Keep Separate and Identified Trust Property 

The trustee must keep the trust property separate from other property not owned by the trust and see that the trust property is designated as property of the trust. That means a trustee must be diligent in keeping trust property titled in the name of the trust. While also ensuring the trust property does not become co-mingled with any other property.

Suppose the trust owns an apartment building. The trustee collects rent monthly from the tenants and pays expenses related to the apartment building. The trustee should be depositing the rent in a trust-owned bank account and paying the costs from that trust-owned bank account. Suppose the trustee collects rent and deposits it in their bank account. They have breached their fiduciary duty by failing to keep trust property separate from their private property.

Trustee's Duty Not to Delegate Trustee's Duties

The trustee has a fiduciary duty to trust beneficiaries. The trustee has a responsibility not to delegate the performance of actions that the trustee can reasonably perform. And may not transfer the office of a trustee to another person nor delegate the entire administration of the trust to a co-trustee or other person. That does not require the trustee to perform every action for the benefit of the trust on their own. For example, if the trust owns a house that needs to be painted, then the trustee is not required to paint the house themself. The trustee is responsible for obtaining a reasonable price for the painter, ensuring the work is done and ensuring the work is of suitable quality.

The trustee will remain responsible for carefully selecting who will perform the investment and management of trust assets. The one notable exception to this rule is that for the acquisition and management of trust assets, the trustee may delegate investment and management as is prudent under the circumstances. That way, it establishes the scope and terms of the duties they've charged—and periodically reviews the investment performance and management of trust assets.

Trustee's Duty to Use Special Skills

There is a problem concerning tax-sensitive transactions. The trustee must apply the full extent of the trustee skills. Suppose the settlor, selecting the trustee, has relied on the trustee's representation of having special skills. In that case, the trustee is held to the skills' standards. That means that a trustee who claims to have substantial training, experience, or education is kept to a higher standard than the average person serving as trustee. For example, consider that the trustee is a certified public accountant. In that case, there is a reasonable expectation that they have a heightened degree of sophistication for tax-sensitive matters. Suppose during their tenure as a trustee. In that case, the trustee is held to a higher standard than the average person. That can prove a breach of fiduciary duty due to the higher standard.

Trustee's Duty to Comply with the Prudent Investor Rule

The trustee shall invest and manage trust assets as a prudent investor would by considering the trust's purposes, terms, distribution requirements, and other circumstances. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

Commonly referred to as the prudent investor rule. It requires a trustee to make investments in a way that is appropriate for the trust beneficiaries. It prohibits the trustee from investing trust assets using their standards.

The prudent investor rule is fundamental, where trust assets are held in the trust for an extended period. That can happen because the trust requires assets to be held or because the trustee has failed to be diligent in carrying out the terms of the trust. Trust beneficiaries who have had their share of the trust held in trust for an extended time should examine whether the trustee has appropriately invested and managed trust assets.

Trustee's Duty to Account to Trust Beneficiaries

The trustee shall account at least annually. The account should happen at the trust's termination. Upon a change of trustee, each beneficiary to whom income or principal is required or authorized in the trustee's discretion is currently distributed. Each event triggers the trustee's duty to account for the beneficiaries. The trust account allows a beneficiary to understand what has occurred with trust assets and income during the period of the account. Reviewing the report is how you, as a beneficiary, will decide whether the trustee has acted appropriately or inappropriately.

 

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Chapter 6

Damages

If you need to go forward with a trust litigation case, you'll want to consider at the beginning what relief you can get from the court. The "relief" means the outcome you want to see from a judge. As you are about to learn, this can involve equitable relief and monetary damages.

Damages are monetary judgments that another person or entity is required to pay to you or the trust. These are different things. Equitable relief involves an order the judge makes that does not directly result in you or the trust obtaining any money.

Equitable Relief

The most common forms of equitable relief in trust litigation are suspending a trustee, removing a trustee, and instructing a trustee. Suspending a trustee is a type of interim relief you can get while your case is proceeding. Suspending a trustee is different from removing a trustee, but both are available for the same reasons, which are:

  1. Breach of trust;
  2. Insolvency of the trustee or other unfitness to administer the trust;
  3. Hostility among co-trustees that impairs administration;
  4. The trustee's failure to act or declining to act;
  5. Excessive compensation;
  6. The sole trustee is a disqualified person;
  7. Substantial inability to manage the trust's resources or adequately execute the duties of the office due to a lack of mental capacity;
  8. Substantial inability to resist fraud or undue influence; and 
  9. Any other good cause.

To get a trustee suspended, you will likely have to show the court that the trustee has stolen trust property. They have taken some egregious actions that caused damage to the trust beneficiaries. Or anything obvious, such as the trustee's inability to perform their duties. The court will suspend a trustee's powers if you suspend a trustee. With this, you will need the appointment of a temporary trustee to ensure the duties of the trustee are carried out and administered correctly. 

An interim or temporary trustee is a neutral third party the trust or beneficiaries often appoint. Removal of a trustee comes at the end of the case. Suppose you are seeking the removal of the trustee. In that case, it's essential that, at the same time, you desire a successor trustee appointed so that there is no vacancy in the trustee's office. The successor trustee will be the next person nominated in the trust if the trust nominates no one else. Then either the trust will have provisions for appointing another person to serve as the trustee, or the trust's income beneficiaries can nominate someone to help.

Determining title to property

Another form of equitable relief involves taking back property wrongfully taken from the trust. That applies to any property. It could be cash, stocks, mutual funds, real estate, or any other type of property you might imagine. In this type of litigation, you'll need to prove the property was owned by the trust and then taken by someone who has no rightful claim to the property. Or property that should be maintained by the trust but diverted to somebody else with no rightful claim to the property. You will be granted the title to the property if you win trust litigation. 

Damages

In trust litigation, there are limited types of damages available. You can get damages against the trustee who breached their fiduciary duties. That is called a surcharge. You may be able to obtain double damages against the person who, in bad faith, has wrongfully taken or concealed trust property. You can also receive attorney's fees and costs in a limited number of cases. In probate court, you cannot get damages for any emotional harm you've suffered related to the improper administration of the trust or the wrongful taking of trust property.

Surcharging the Trustee

A surcharge is a probate court order for compensatory damages against the trustee. In other words, it's the amount of money you get for proving the trustee breached their duties. Surcharges are measured in one of three ways, depending on the circumstances of your case:

  1. Any loss or depreciation in the value of the estate resulting from a breach of duty, with interest;

One common way to get a surcharge is to show improperly invested assets, resulting in a loss. Another is to show that the trustee failed to preserve investments. For example, they are not taking care to maintain investments if they fail to insure a house that burned down. It's important to note that if you suffer this loss, you are also entitled to interest.

2. Any profit made by the trustee through their breach of duty, with 

interest;

If the trustee profits from their breach of duty, you are entitled to that profit. That can happen by the estate "loaning" money or "investing" in the trustee's business or project. Let's say the estate "loaned" the executor $100,000 to flip a house. Miraculously, the flip was successful. The executor made $75,000 on it. Your damages would be $175,000 plus interest. 

3. Any profit that would have accrued to the estate if the loss of

profit is the result of a breach of duty.

The availability of this remedy will very much depend on the terms of the trust. For example, let's suppose the trustee is required to hold on to the trust's assets for five years before distribution, and the trustee is required to invest the trust assets. If the trustee fails to invest the trust assets appropriately, then profits may be missed by the trust. Consequently, gains will be ignored or missed if the real estate has a run-up in value. A rising stock market would mean missed profits if stocks were an appropriate investment.

Double Damages

If a person has done the following, you can get double damages against them. Double damages are twice the amount of the surcharge or compensatory damages ordered in your case. That is what you need to prove to get double damages:

1. A person in bad faith has wrongfully taken, concealed, or disposed of property belonging to the trust;

Most often, used against the trustee. For example, suppose the trustee takes money from the estate's bank account and transfers it to themselves for no real reason. In that case, that's good evidence that they took the property and did it in bad faith.

2. A person in bad faith has wrongfully taken, concealed, or disposed of property belonging to the trust by the use of undue influence; or

That can happen by someone close to the settlor manipulating the settlor into giving them trust property. That is especially common among people with cognitive problems, like dementia, and elderly trustees who are dependent or just too trusting.

3. A person, in bad faith, has taken, concealed, or disposed of the property through elder financial abuse.

Number 3 happens when the taking is over while the settlor is alive and 65 or older. Sometimes this isn't discovered until after death. A typical example is transferring a home or bank account to a child or grandchild, with the settlor getting nothing in return. This situation allows the trustee or beneficiary to pursue a property that would have been in the trust. If not for the wrongdoing.  

It's essential to note that you must prove that the taking of property happened in bad faith. To prove this, you'll have to meet a high standard of proof. It's common for these cases to be clear-cut once you find evidence of what occurred. If it is muddled, you may still be able to get the property returned, or damages ordered for the property seized. However, it may not be possible to get double damages.

There is a division within California's appeal courts regarding whether double damages mean that you double the damages. Or double damages are added to a damages order resulting in triple damages. Most appeals courts that have ruled on this have said the double damages get added to the other damages. So in most of California, you could potentially get triple damages.

Attorney's Fees in Trust Litigation

Are attorneys' fees awarded in trust litigation? Generally, attorneys' fees are not in trust litigation. However, there are some important exceptions to that rule. Suppose you prove a person wrongfully took or concealed trust property and did so in bad faith. The court can award reasonable attorney's fees and costs in that case. If an objection happens to a trust account defended in bad faith, then the court may award attorney's fees and costs to the trustee. 

Similarly, suppose a trustee provides a trust account to which there is an objection. In that case, the trustee defends the account in bad faith. The court can award attorneys' fees and costs to the objector. In all instances where reasonable attorneys fees and expenses are awarded-you must prove bad faith. 

When a trustee is removed because they are a "prohibited person," the removed trustee shall bear all costs of the proceeding, including reasonable attorney's fees. The list of "prohibited persons" include:

  • The person who drafted the trust;
  • The person who caused the trust to be drafted or was in a fiduciary relationship with the settlor when the trust was created;
  • A care custodian of a dependent adult;
  • An employee of any of the people described above;

There are important exceptions to these rules. These exceptions include anyone within "four degrees of relation" to the settlor. Children, grandchildren, spouses, nieces, nephews, brothers, and sisters are excluded.

Chapter 7

Cost of Trust Litigation

In discussing costs, we only address the cost of trust litigation in California. We practice here and know how attorneys charge for their services. The general idea of what follows may apply to other states. However, you should check with a local attorney if your case is outside California.

How Are Costs Covered for Beneficiaries v. Trustees

The cost of trust litigation in California depends on two things. First is whether you are a beneficiary of a trust trying to get your rightful inheritance or the trustee. Second is whether you decide to pay for litigation hourly or use a contingency fee.

Suppose you are a beneficiary seeking your rightful inheritance. In that case, nearly any trust litigation attorney in California will gladly represent you using a standard hourly fee. A smaller number will agree to take the case on a contingency fee basis.

If you are the trustee, then in most cases, you will pay your trust litigation attorney on an hourly basis. The one significant exception is where the trustee is litigating to get the property back into the trust. In other words, if a property was wrongfully taken from the trust and you want title or possession, you will have to litigate to get it back. Suppose the trust has few or no assets. In that case, you will probably have to find a trust litigation attorney who will take your case on a contingency fee. That is because there is no other way to pay for the litigation.

For a more concise overview of the cost of Trust Litigation, check out our article, "Trust Litigation Costs in California," for more information about your specific needs.

Hourly Attorney Fees

Hourly fees in California trust litigation cases are just what you expect. You pay the law firm for the time it put into the case and the various costs incurred in pursuing your case. Attorneys receive an hourly rate or a range of rates if several attorneys work on the case. Paralegals are paid at a lower hourly rate. In addition, various out-of-pocket costs will be incurred. When you hire an attorney under an hourly agreement, there is no promise of any outcome. What you are paying for is the time the law firm puts into your case.

There is no way to know precisely the total cost under an hourly fee agreement. The range is so broad that it can't be estimated at the start of a case. It is impossible to know precisely how much time will go into your case at the beginning of the case and what the total out-of-pocket costs will be.

Understand that an estimate is just that, an estimate. If your case ends early, the money held in your attorney's client trust account will be returned to you. If the funds in the client trust account run out and your case is not finished, then expect to deposit more money in the client trust account.

Factors that influence hourly fees

When you hire an attorney on an hourly fee basis, you can expect to be asked for a retainer. The retainer is money deposited in the firm's client trust account. That's your money sitting in an account that can only be used for the work and costs of your case. You should get a monthly invoice from the law firm, which will show you the hours spent on your case, who performed the work, the work performed, and any spent for costs related to your lawsuit. Prices include filing fees, deposition transcripts, copies of documents, process services, and other miscellaneous services. 

There is any number of out-of-pocket costs that may be incurred for your case. Those costs will be itemized in your monthly invoice. In an hourly fee retainer agreement, if your case ends and the initial retainer has not been entirely used, whatever is left gets returned to you. The flip side is that if the firm has billed through the amount you first deposited, you must replenish the funds in the client trust account to keep the firm working on the case. Depending on your retainer and the amount of work performed, you may have to deposit more money multiple times, and out-of-pocket costs may be incurred.

Trust Litigation Contingency Fees

Under a contingency fee agreement, you only pay your attorney when they have gotten you something of value. "Something of value" could be money, real estate, tangible items, etc. You will unlikely know everything of value owned by the trust at the start of the case. Whatever comes in with financial value becomes the basis for whatever the payment will be under the contingency fee. Most firms will offer some form of a tiered contingency fee agreement. At The Grossman Law Firm, we structure our deal in the following way for the vast majority of our cases: 

  • 25 percent of whatever value is recovered if we're able to resolve the case without having to file a petition in the probate court, 
  • One-third of what's recovered if the case settles at least 90 days before the first set trial date, and 
  • After that time, there's a settlement close to trial or a trial and judgment in your favor. ( it's 40 percent of what's recovered)  
  • In addition, the firm is reimbursed for direct out-of-pocket costs associated with your case.

Typical trust litigation case expenses include court reporter fees, deposition transcripts, certified copies of certain official documents, regular copies of other types of documents, process service, and filing fees. If there are experts, there will be expert witness fees.

How do these arrangements apply to common types of trust litigation? 

Suing a trustee for a breach of their fiduciary duty

The most common type of litigation is suing a trustee for a breach of their fiduciary duty. The most common types of breaches of fiduciary duty are: the trustee's failure to provide a copy of the trust, the trustee won't account, the trustee's accused of either mismanaging or just plain taking trust assets for him or herself, or the trustee won't distribute the trust assets to the beneficiary.

If you are litigating a breach of the fiduciary case, then it is a beneficiary who is suing a trustee. If you are the beneficiary, it is easy to find an attorney who will represent you hourly. Depending on the facts in your case, you may be able to find an attorney that will take your case on a contingency fee. Suppose you are the trustee and you are defending a breach of fiduciary duty. In that case, you are certainly going to be using your trust attorney and paying them on an hourly basis to protect you in the case. 

The factors that are likely to affect the total cost of your case will be: how you must prove the breach of fiduciary duty, how difficult the trustee wants to be in this litigation, and the particular judge to which the case has been assigned. Some violations are not that difficult to prove.

For example, suppose you are in litigation with your trustee because they failed to provide you with a copy of the trust or they failed to account. In that case, it's a very straightforward case. You will provide a copy of your written demand, alleging that you either haven't gotten the trust or you haven't gotten the account, and that is pretty much the case. If your claim is, in fact, that straightforward, you are going to have relatively low costs.

On the other hand, your costs can significantly increase if your case is more complex, for example, if you're challenging an account or need to make a distribution. More witnesses need to be involved, more documents must be obtained and examined, and the possibility of bringing in expert witnesses will drive up the cost. Get a trustee who is difficult simply for the sake of being difficult. That will take more time and possibly cost more because of the different work that needs to be done. 

Your particular judge is a factor in this as well. Some judges want to keep cases moving and monitor attorneys to ensure that happens. Other judges are not worried about issues going on for a long time, even if there is no good reason. Some judges have no problem setting trial dates. In contrast, other judges will not select trial dates unless the parties have gone to mediation or engaged in alternative dispute resolution. A judge like this will not give you a trial date without meeting these hard and fast rules, which means more time and costs associated with a case. 

The range for what these cases may cost is extensive because of these factors. On an hourly basis, if your case is straightforward, you may finish the case for something less than $5,000. As the complexity and the difficulty increase, you will see a steep climb in cost. Getting the case to trial may cost anywhere from a hundred to fifty thousand dollars. Of course, if you settle your case along the way, that will reduce the actual cost. 

Suppose you're the beneficiary and have hired your attorney on a contingency fee basis. In that case, you know in advance that your cost will be the percentage of what is recovered plus the direct out-of-pocket expenses related to your lawsuit. 

Trust Contests

Potential beneficiaries only file trust contests; trustees never file them. Hiring your lawyer by the hour is very common if you file the trust contest. A much smaller number of lawyers are willing to do these on a contingency fee basis. You can expect that any lawyer considering a contingency fee will evaluate the facts of your case with you before agreeing to take it. 

Suppose you are the trustee, and you are defending the trust contest. In that case, you will pay your trust litigation attorney hourly. 

The factors that will increase the cost of your case can be any of these three predicaments. The length of time your case goes on, the number of witnesses that may be involved, and the number of records that need to be obtained and analyzed. 

Trust litigation almost always goes forward on the belief that the person who created the trust or the trust amendment either had mental incapacity or was subject to undue influence. What that nearly always means in these cases is that some number of depositions need to be taken, and financial and medical records need to be obtained. Very commonly, there's a need for expert witnesses. A trust contest that goes to trial can easily cost a hundred to one hundred fifty thousand dollars. Consider that you have hired your attorney on a contingency fee basis. In that case, you will pay a percentage of whatever you receive from the trust plus your out-of-pocket costs. 

Suing a Third Party as the Beneficiary

A beneficiary suing a third party who took property from the trust differs from a breach of fiduciary duty case. That is not litigation against the trustee. Litigation against someone else who took trust property, likely while the settlor was still alive. Even if the person who took the property is the trustee, suing for taking trust property is different from a breach of fiduciary duty.

A typical scenario is the trust settlor transferring title to a piece of real estate to somebody else while the settlor was alive. After they have died, the claim is that the property belongs to the trust. If you are a trust beneficiary, then you may be able to skip this litigation altogether. If there has been an improper taking, the trustee may decide that it's essential for the trust to litigate this case to get that property back into the trust. However, you may have a situation where your trustee does not want to engage in this kind of litigation for some reason. If that is the case and you believe it is essential to pursue it, then you, as the beneficiary, can file this lawsuit. You can hire a lawyer on a regular hourly arrangement, or you can do it on a contingency fee. If you are the trustee, then the extreme likelihood is that you will pay your trust litigation attorney at an hourly rate. The one significant exception is if the trustee has taken over and realizes there are either no assets in the trust or very few assets. In those circumstances, the trustee does not have the resources to a trust litigation lawyer hourly. In that circumstance, you'll almost certainly need to hire a lawyer on a contingency fee basis. 

The factors determining the cost of a case are similar to what you see in a trust contest. The intriguing part is that a person who has taken property is incentivized to litigate the case. That is because, unlike trust contests where there's an open question about who's going to inherit, where a third party has already taken something, they now have the title or physical possession. They are not going to want to give up what they have. Not everyone in that situation is necessarily irrational. However, it is prevalent for people like that to dig in and fight because they don't want to give up what they already have under their control. Assume your case goes to trial against a third party. In that case, it is usual that the total cost of the case is anywhere between seventy-five thousand and one hundred fifty thousand dollars on an hourly basis. 

Suppose you hired your attorney on a contingency fee agreement. In that case, again, it is going to be a percentage depending upon how far you've gone into the case plus the direct out-of-pocket costs associated with your case.

contact us More about the cost of trust litigation
Chapter 8

Conclusion

If you haven’t gotten your rightful inheritance, then know you have to take action to make that happen. Nothing happens automatically when trust administration has gone wrong. Let’s be very clear. Suppose you think trust litigation is proper for you and walk away without taking action. In that case, you could lose some or all of your inheritance. 

If your case is in the state of California and you’d like an honest evaluation of your case, then give us a call or fill out our contact form. Because we know that time is of the essence, you can expect to hear from us the next business day to begin discussing your case.

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