Trust Litigation Costs in California
Beneficiaries v. Trustees
The cost of trust litigation in California depends on a couple of things. First, is whether you are the beneficiary of a trust trying to get your rightful inheritance or the trustee of the trust who is acting on behalf of the trust. Second, is whether you decide to pay for your litigation on an hourly basis or using a contingency fee. If you are a beneficiary seeking to get your rightful inheritance, then nearly any trust litigation attorney in California will be glad to represent you if you pay using a traditional hourly fee. A smaller number will agree to take some cases on a contingency fee basis.
If you are the trustee of the trust then in most cases, you will pay your trust litigation attorney on an hourly basis. The one important exception to this is where the trustee is litigating to take property back into the trust. In other words, if property was wrongfully taken from the trust and you want title or possession to that property then you will have to litigate to get it back. If the trust has little or no assets, then you are probably going to have to find a trust litigation attorney who will take your case on a contingency fee. This is simply because there is no other way to pay for the litigation.
Hourly Attorney Fees
Hourly fees in California trust litigation case are just what you expect them to be. You pay the law firm you hire for the time they put into the case and the various costs that are expended in pursuing your case. Attorneys are paid at an hourly rate or a range of rates if several attorneys are working on the case. Paralegals are paid at a lower 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 kind of outcome. What you are paying for is the time the law firm puts into your case.
There is no way in advance to know exactly what a case will cost under an hourly fee agreement. It is impossible to know at the very beginning of the case exactly how much time will go into your case and what the total out of pocket costs will be.
Factors that influence hourly fees
When you hire an attorney on an hourly fee basis, you can expect to be asked for a retainer. A retainer is money that is deposited in the firm’s client trust account. You should get an invoice monthly from the law firm. The invoice will show you the hours spent on your case, who performed the work, what work they performed, and any spent for costs related to your case.
Costs include items such as filing fees, deposition transcripts, copies of documents, process service, etc. There are 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, your money will be on deposit in the firm’s client trust account. Whatever is left gets returned to you. The flipside to this is if the firm has completely billed through your initial retainer, then you must replenish the funds in the client trust account to keep the firm working on the case. You may have to deposit more money multiple times during your case depending on the amount of your retainer and the amount of work performed.
The other type of agreement available for trust litigation cases are contingency fee agreements. Under a contingency fee agreement, you will pay your attorney anything, unless and until, your attorney has gotten you something of value in return. “Something of value” is a very broad term, because in trust litigation there is a broad spectrum of things that may be obtained, whether it be money, real estate, or tangible items. Whatever it is that comes in that has financial value then becomes the basis for whatever the payment will be under the contingency fee.
Most firms will offer some form of tiered contingency fee agreement. That means it will be a beginning percentage if the case is settled without having to go to court, a higher percentage if the case is settled sometime before trial, and then a higher if you settle shortly before trial or go to trial.
Our Contingency Fee Arrangement
In our firm, we structure the agreement as follows. For the vast majority of our cases, it is twenty five percent (25%) of whatever value is recovered if we can resolve the case without having to file a petition in the probate court. It is one third (33 1/3%) of what is recovered if the case settles at least 90 days before the first set trial date. If your case is resolved after that time (either because there is a settlement close to trial or because there’s been a trial and there’s a judgment in your favor), then it is forty percent (40%) of what’s recovered. In addition, the firm is reimbursed for the direct out-of-pocket costs associated with your case. Common costs include filing fees, deposition transcripts, certified copies of official documents, copies documents obtained by subpoena, and process service. If an expert witness was retained, then they are going to be expert witness fees. The point is you will pay exactly what they cost; there is no markup, so under the contingency fee agreement you will not pay anything unless you get something of value in return.
Evaluating Whether a Contingency Fee Is Right for You
A contingency fee is a form of risk shifting. You are, in essence, coming to a law firm saying “I have a good case and I want you to represent me and I’ll give you some portion of it in return for you getting me my inheritance”. The firm must evaluate the relative strength of your case because of the risk they are taking. Most cases take somewhere between one and three years to conclude either by some sort of negotiated settlement or a trial. The firm knows they are going to put in their time, and they are going to have to spend money out of their own pocket to pursue the case. If they are unsuccessful, then there is no recovery under a contingency fee. You do not pay the firm anything. That is the risk shifting. It is the firm that pays for the whole thing without getting anything in return if there is no recovery.
The other extreme is the possibility that things go more smoothly than anybody would have anticipated at the beginning. It may be that the case settles earlier than anyone would think. If that happens, then you think “well gee the firm has gotten a windfall.” This can happen because nobody knows at the beginning of a case exactly how long the case will take. You do not know what kind of opposition you are going to get, how strong it will be, and you do not know the “unknowns” of your case.
How Hourly Fees and Contingency Fees Apply to Common Case Types
Breach of Fiduciary Duty
The single most common type of litigation is suing a trustee for a breach of their fiduciary duty. Common examples of a trustee’s breach of fiduciary duty include the trustee mismanaging trust assets, taking trust assets for themselves, failing to account, and the trustee failing or refusing to distribute the trust assets to the beneficiary.
If you are suing a trustee for breaching their fiduciary duty you can certainly hire an attorney to represent you on an hourly basis. You may be able find an attorney that will take the case on a contingency fee. If you are the trustee defending a claimed breach of your fiduciary duty, then you will almost certainly be paying your trust attorney an hourly rate to defend you. The factors that are likely to affect the total cost of your case are going to be exactly how you have to prove the breach of fiduciary duty, how difficult the trustee wants to be in this litigation, and the particular facts and circumstances of your case. Some breaches are plain as day and straightforward to prove. For example, if you are suing the trustee because they failed to account, it is a very straightforward case. You will provide a copy of your written demand for an account and allege you have not received an account. That is pretty much the entire case. There is often not a lot in the way of a defense to that, so if your case is in fact that straightforward, you are likely going to have relatively low costs.
On the other hand, if you have something a lot more complex. if you are challenging an account or you are litigating the need to make a distribution, then those cases can really ramp up in complexity depending on the facts in your case. The more witnesses that are involved, the more documents that need to be obtained and examined, and the possibility of bringing in expert witnesses, are all going to drive up the cost. Additionally, if you get a trustee who is difficult simply for the sake of being difficult, that is going to be more time and possibly greater out of pocket costs because of additional work that needs to be done.
Your judge is a factor in this as well. There are some judges that want to keep cases moving and will sit on attorneys to make sure that happens. Other judges are not worried about cases being continued even if there really is no good reason. Some judges have no problem setting trial dates, while other judges will not set trial dates unless the parties have gone to mediation or have engaged in some other kind of alternative dispute resolution, and these judges will have hard and fast rules. They simply will not give you a trial date without doing that, which means more time and more costs associated with a case. So, the range for the total case cost is very wide.
If you hire your attorney on an hourly and your case is straightforward, then you may finish the case for something less than $5,000 in attorney’s fees and costs. As the complexity and the difficulty increase, you will have a steep climb in total cost. Getting your case to trial may cost anywhere from a $100,000-$150,000 depending upon exactly what is at issue in your case.
People commonly ask, “what if we settle?” Of course, if you settle your case along the way, that is going to reduce the total cost. If you are the beneficiary and you have hired your attorney on a contingency fee basis, then you know in advance you will pay your attorney the percentage stated in your fee agreement of what’s actually recovered plus the direct out-of-pocket costs related to your case. If you hired your attorney on an hourly basis then the billing stops when your case settles.
If you are challenging the validity of a trust or a trust amendment, (commonly referred to as a trust contest), hiring a lawyer on an hourly basis is very common. There is a much smaller number of lawyers that are willing to take these cases on a contingency fee agreement. You can expect that any lawyer who is considering a contingency fee is going to examine the facts of the case with you before agreeing to take it. If you are the trustee and you are defending the trust contest, then you are certainly going to be paying your trust litigation attorney on an hourly basis. The factors that will increase the cost of your case are 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 contests almost always go forward on the belief that the person who created the trust or the trust amendment either had some sort of mental incapacity or they were subject to undue influence. What that almost always means in these cases is there are some number of depositions that need to be taken, there are financial and medical records that need to be obtained, and very commonly there is a need for expert witnesses. The more people involved, the more documents that must be obtained and then analyzed, and the number of expert witnesses all are going to drive up the cost of the case. A trust contest that goes to trial can easily have a cost of $100,000-$150,000 on an hourly basis. If you have hired your attorney on a contingency fee basis, then you are going to pay a percentage of whatever you receive from the trust plus your out-of-pocket costs.
Third Parties Who Have Taken Trust Property
At first pass, this may sound like it is a breach of fiduciary duty case, but it is not. This is not litigation against the trustee. This is litigation against someone else who took trust property almost certainly while the person who created the trust was still alive. A very common scenario is the person who created the trust, before they died, transferred the title to a parcel of real estate to somebody else. You are saying to yourself, “wait a minute, that property really belongs to the trust.” That is what a third-party case is.
As an aside, if the trustee is the person who took the property then you may have multiple claims in your case. A trustee can be sued for both breach of fiduciary duty and wrongfully taking trust property.
If you are the beneficiary of the trust, you may be able to skip this litigation altogether. The reason is if there has been an improper taking, then the trustee may decide that it is important 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. If that is the case and you believe it is important to pursue it, then you as the beneficiary can file this lawsuit. If you are the beneficiary and you are pursuing this case, 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 very strong likelihood is you are going to be paying your trust litigation attorney an hourly rate. The one important exception to this is if the trustee realizes there are either no assets in the trust or very little assets in the trust, then the trustee does not have the resources to pay the lawyer on an hourly basis. In that circumstance, you will almost certainly need to hire a lawyer on a contingency fee basis.
The factors that determine the cost of a case like this are similar to a trust contest. Realize from the start, a person who has taken property is really incentivized to litigate the case. Unlike a trust contest, where there is an open question about who’s going to inherit, when a third party has already taken something, they now have title or they have physical possession and they are not going to want to give up what they already have. While not everybody in that situation is irrational, it is very common for people like that to dig in and fight because they do not want to give up what they already have under their control. If your case goes to trial against the third party, it would be unsurprising if the total cost of the case is anywhere between $75,000-$150,000 on an hourly basis. If you hired your attorney on a contingency fee agreement, you would pay the percentage stated in your contingency fee agreement plus the direct out-of-pocket costs associated with your case.
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