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Although television may have shaped how people think about law and lawsuits, there are cases beyond criminal justice concerning murder and money laundering. An important and often divisive type of lawsuit is Trust Litigation.

Trust Litigation Guide

Trust Litigation is any civil lawsuit concerning a trust or the trustees that is taken up in Probate court. Within the realm of Trust Litigation are 5 main claims or causes of action:

  • Breach of Fiduciary Duty
  • Disputed Trust Accountings
  • Trustee Removal
  • Disputes between Co-trustees
  • Petitions for Instructions

Trust Litigation is any civil lawsuit concerning a trust or the trustees that is taken up in Probate court. Within the realm of Trust Litigation are 5 main claims or causes of action.

It’s important to note that these claims are not exclusive of each other and they may overlap with one another in any case involving trust litigation. So what exactly are these 5 main claims?

Breach of Fiduciary Duty

A fiduciary duty is essentially an obligation of one party to act in the best interest of another, related party. For example, an attorney representing a client has a fiduciary duty to the client whose case they take up. Fiduciary obligations or duties largely exist as a part of trusts or other forms of legal confidence; here, the fiduciary must agree to use their expertise and experience in a way to best benefit the client. Honesty, transparency and effort are expected with fiduciary obligations and any action counter to this expectation (for example, acting in the attorney’s best interest rather than the clients) would warrant a breach in fiduciary duty.

Fiduciary duties concerning trusts have specific expectations assigned to the trustee. For instance, the California Probate Code presents the following:

  • The duty to administer the trust according to its terms
  • The duty of confidentiality
  • The duty to account
  • The duty not to delegate certain functions
  • The duty to keep beneficiaries informed
  • The duty of loyalty
  • The duty to furnish trust terms upon request
  • The duty to avoid conflicts of interest
  • The duty to finish information to a beneficiary upon a reasonable request
  • The duty of impartiality

If any duties under probate code are not met, a breach of fiduciary duty is likely the result.

Disputed Trust Accountings

A dispute of trust accountings can take many forms. One common instance is an appointed trustee’s refusal to provide consistent and accurate accountings of the trust fund. Another possible cause for dispute would be the trust beneficiary’s belief that the appointed trustee acted in an objectionable manner that may have compromised or affected the accounting of the trust fund. In all cases, trust beneficiaries have the right to request that Probate Court of California compel the appointed trustee submit an account of the trust’s funds, property and or assets.

Part of the complication that arises from disputed trust accountings is the fact that there may be multiple parties involved, outside of just the trustee and the beneficiary. For instance, the trustee, the sole owner of the trust in question, may hire an outside professional such as an attorney or CPA, to help them manage the trust while the beneficiary may hire their own attorney to help them sort through the process. No matter who is involved, the trustee is legally obligated to administer the trust in the best interest of the beneficiary.

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Trustee Removal

Throughout the entire process of trust litigation, the beneficiary always retains the option to remove a fiduciary (usually the trustee). One of the 5 most common reasons for removing a trustee are:

  • Failure to comply with trust terms
  • Neglecting or mismanaging the trust’s assets
  • Self-dealing
  • Good cause (i.e. irreconcilable differences)
  • Hostility towards beneficiaries

Each reason represents a breach in fiduciary obligations between the beneficiary and the trustee. If a beneficiary feels that the trustee has broken this obligation they may hire an Estate Litigation Attorney to petition for that trustees removal. In trust litigation cases which can put a strain on fraternal as well as familial relationships, it is sometimes best to remove one of the parties involved in order to avoid further conflict down the line.

Disputes between Co-trustees

Co-trustees are two parties put in control over the trust’s funds and assets and because of this dual ownership; differences in opinion and action are bound to arise. Co-trustees are usually closely related; either their two parents or two children. Disputation between trustees, specifically co-trustees, is closely related to trustee removal because that is usually the outcome that comes from this type of claim. This type of dispute however can be resolved in other ways:

  • There may be instructions on how to resolve this issue in the trust document itself
  • The two conflicting parties may ask the beneficiaries which course of action they should take
  • They can hire attorneys, which may ultimately lead to trustee removal

Petitions for Instructions

When conflicts arise between the trustees and the beneficiaries, both sides may propose solutions that they believe to be the best courses of action with regards to the trust. If both sides cannot agree on how to move forward, they may take it straight to the judge. Basically, conflicting parties go to the courts and ask for outside legal counsel on how best to interpret the instructions of the trust.

If a trustee presents a solution to the judge and or jury and they believe and accept the evidence and circumstances surrounding it, then this petition is served to the other parties. However, the stipulation with this course of action is that the other parties (a co-trustee or beneficiary) may present a counter-petition to the same judge, and begin the process all over again.

What’s the Price?

Now that the question of how to go about trust litigation has hopefully been answered, the question becomes how to go about paying for it. Generally speaking, the costs of trust litigation can be paid off by the trust in question dependent on the party. A beneficiary arguing against the trustee, may have the costs paid by the trust but more often than not, this is seen as a personal expense and they may have to pay out of pocket.

Conversely, the trustee, seeking counseling on how to administer the trust in which they are legally responsible, can usually have the fees accrued during this obligation paid off by the trust. Another aspect of price to take note of is the fact that probate cases, which trust litigation falls under, are generally bench trials, which are cheaper than trials by jury. Although the drop in cost is a definite benefit, the potential bias and assumptions of the judge may affect the outcome of the overall trial over the trust.

Cathy Carter