Accounting Contest: Trustees Must Act Reasonably After an Account Objection

Under the law in California, beneficiaries of a trust have a right to contest a trustee’s accounting. Accounting is an important trustee responsibility. This is because it documents the income and expenses of the trust for the reporting period. These contests cannot be filed frivolously. Similarly, a trustee is under an obligation not to object to an accounting contest without good cause.

Trustee Penalties When Objecting in Bad Faith to an Accounting Contest

When a beneficiary files an objection to a trustee’s account, the trustee has the option to oppose the beneficiary’s contest of the account. The opposition must be made in good faith. If the court decides that the opposition was made without reasonable cause and in bad faith,  the beneficiary may be awarded the following:

• First of all, the costs of the contest.
• Furthermore, the expenses of the litigation.
• Lastly, the cost for the attorney fees incurred as a result of the contest.

The amount that is awarded to the beneficiary is taken out of the funds that are to be paid to the trustee as compensation for his or her services. If the trustee has any other interest in the trust assets, the award can also be taken from that portion. If there is any amount of the award that is unpaid, the trustee can be held personally liable.

Clearly, trustees that are involved in a beneficiary’s contest of an account should obtain guidance from an experienced legal professional before proceeding.

 

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