By Phillip Szachowicz, Trust Litigation Attorney at RMO LLP
When dealing with a trustee who won’t do their job, compelling them via court order has been the traditional route for recourse. But even if you expect litigation to go in your favor, it’s important to take the proper steps to ensure the trust itself remains unscathed.
Trustees are required to follow the direction of the trust to the letter, but that’s commonly not how trustees function in practice. Hostility towards a beneficiary, a belief that the wording of the trust fails to reflect the “true” beliefs of the settlor, or the thought of utilizing the trust funds as a personal “piggy bank” or new source of passive income can motivate a trustee to neglect or even defy the trust’s terms, making legal intervention necessary.
Your first step in these cases should be to contact a probate attorney, who can evaluate the trust to determine whether the trustee is holding up their end of the bargain. If not, they will recommend sending a demand letter, seeking either an accounting of the trust, the turnover of relevant documents, and/or a particular action to be taken by the trustee.
If you’re lucky, the threat of litigation will spur a trustee to act on the demand. If the trustee remains noncompliant, your next move is to file a petition with the court. The petitioning process can require a 60-day waiting period if it’s being filed to compel the production of relevant information, including an accounting. If a resolution can’t be brokered by the end of that 60-day period, it will be necessary to file a petition asking the court to order specific action on the trustee’s part, or to replace them entirely.
In the event of other issues (for instance, if the trustee is threatening to breach their duties or abscond with funds) you can petition the court immediately. If the trustee’s actions are severe enough to warrant immediate action, it may be prudent to file a petition as soon as practicable to protect the trust, even if you continue to attempt to informally resolve the trustee’s issues while awaiting your court hearing.
If a resolution can’t be brokered by the end of that 60-day period, it will be necessary to file a petition asking the court to order specific action on the trustee’s part, or to replace them entirely.
Unfortunately, legal action could threaten the value of the trust even if its cause is entirely justified, as a trustee may attempt to use trust funds in defense of their position as its overseer. And depending on the local court’s rules, there’s not much that can be done to stop it.
I’ve seen this happen a number of times over my years in practice, as judges can’t take action to censure or replace a trustee before they’ve already started using trust funds for their own legal defense. While the court could ultimately order the repayment of these funds, collecting on it creates yet another headache for the filing party to deal with.
Thankfully, many courts have begun to implement rules to address this specific contradiction. In San Diego County Court, for example, judges have begun issuing early orders specifically prohibiting trustees from utilizing trust funds to bankroll themselves in litigation. Alternatively, they may set a specific cap on the amount of funds that can be repurposed towards their defense or authorize an equal amount of the trust corpus to be used towards all parties’ attorneys’ fees. These early, creative orders serve to somewhat level the playing field among the trustee and other litigants.
At the moment, this is less of a rule and more of a trend, as the rules and case law have been there a while (i.e. Probate Code § 17206, Whittlesey v. Aiello (104 Cal. App. 4th 1221), and Terry v. Conlan (131 Cal. App. 4th 1445)). It seems courts are only now realizing that an easy way to push these cases towards resolution is to cut the cash flow.
While it’s always worth making informal efforts to resolve matters ahead of any litigation, a mistake commonly made by those in disputes with a trustee is to allow this inactive period to drag on too long. It’s important to involve a probate attorney as soon as possible. They can help you document communications, ensure the rules are followed (not just by you but also by the trustee), and pursue the appropriate actions in court, if necessary.
If you suspect a trustee is acting improperly, you should reach out to our attorneys at RMO LLP.
RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.
