Beneficiary Beware: When Trust Litigation Backfires and You Pay the Trustee’s Legal Fees

As a Beneficiary of a California Trust, you have important rights, including the right to receive information, hold your Trustee accountable to their fiduciary duty, and even challenge their actions in Probate Court if you suspect a breach of trust. However, the legal system also has safeguards against its misuse. While the standard American rule is that each party pays their own attorney’s fees, California trust law carves out significant exceptions. Beneficiaries who pursue claims unreasonably or in bad faith can face a harsh consequence: being ordered to pay the trustee’s legal fees incurred defending against those claims.

Understanding when and how this “fee-shifting” can occur is crucial for any beneficiary considering or involved in trust litigation.

As a Beneficiary of a California Trust, you have important rights, including the right to receive information, hold your Trustee accountable to their fiduciary duty, and even challenge their actions in Probate Court if you suspect a breach of trust. However, the legal system also has safeguards against its misuse. While the standard American rule is that each party pays their own attorney’s fees, California trust law carves out significant exceptions. Beneficiaries who pursue claims unreasonably or in bad faith can face a harsh consequence: being ordered to pay the trustee’s legal fees incurred defending against those claims.

Understanding when and how this “fee-shifting” can occur is crucial for any beneficiary considering or involved in trust litigation.

This specific California Probate Code section addresses situations where a beneficiary files objections to a trustee’s formal Accounting. If the court finds that the beneficiary brought the contest (objections) both “without reasonable cause” and “in bad faith,” it has the power to order the trustee’s reasonable attorney’s fees and costs incurred defending the accounting to be charged against the objecting beneficiary.

• The Two-Prong Test: Proving both unreasonableness (lacking factual or legal basis) and bad faith (improper purpose, like harassment, delay, or personal animosity) is required. Courts often look at the overall conduct – were objections frivolous, overly broad, or designed to leverage unrelated disputes?
• Serious Consequences: If the court makes this finding, the fees are first charged against the objecting beneficiary’s share of the trust principal and income. Crucially, if their share is insufficient to cover the awarded fees, § 17211(a) allows the court to hold the beneficiary personally liable for the remaining amount from their own assets outside the trust.

This specific California Probate Code section addresses situations where a beneficiary files objections to a trustee’s formal Accounting. If the court finds that the beneficiary brought the contest (objections) both “without reasonable cause” and “in bad faith,” it has the power to order the trustee’s reasonable attorney’s fees and costs incurred defending the accounting to be charged against the objecting beneficiary.

• The Two-Prong Test: Proving both unreasonableness (lacking factual or legal basis) and bad faith (improper purpose, like harassment, delay, or personal animosity) is required. Courts often look at the overall conduct – were objections frivolous, overly broad, or designed to leverage unrelated disputes?
• Serious Consequences: If the court makes this finding, the fees are first charged against the objecting beneficiary’s share of the trust principal and income. Crucially, if their share is insufficient to cover the awarded fees, § 17211(a) allows the court to hold the beneficiary personally liable for the remaining amount from their own assets outside the trust.

Even outside the specific context of accounting objections, California Probate Courts retain broad equitable powers to manage trust proceedings fairly. Case law (Rudnick v. Rudnick, Pizarro v. Reynoso) confirms that if a beneficiary instigates an unfounded proceeding against the trust in bad faith, the court can use its equitable power to charge the trustee’s reasonable defense fees against that beneficiary’s share of the trust estate.

• Focus on Bad Faith: This equitable remedy primarily hinges on proving the beneficiary acted in bad faith – initiating litigation not for legitimate reasons but for improper purposes.
• Limitation: Unlike the statutory power under § 17211(a), the court’s inherent equitable power to shift fees is generally limited to charging the beneficiary’s interest in the trust. It typically does not extend to imposing personal liability beyond their trust share (Pizarro).

Even outside the specific context of accounting objections, California Probate Courts retain broad equitable powers to manage trust proceedings fairly. Case law (Rudnick v. Rudnick, Pizarro v. Reynoso) confirms that if a beneficiary instigates an unfounded proceeding against the trust in bad faith, the court can use its equitable power to charge the trustee’s reasonable defense fees against that beneficiary’s share of the trust estate.

• Focus on Bad Faith: This equitable remedy primarily hinges on proving the beneficiary acted in bad faith – initiating litigation not for legitimate reasons but for improper purposes.
• Limitation: Unlike the statutory power under § 17211(a), the court’s inherent equitable power to shift fees is generally limited to charging the beneficiary’s interest in the trust. It typically does not extend to imposing personal liability beyond their trust share (Pizarro).

Fee-shifting provisions serve a critical purpose: protecting the trust assets (which belong to all beneficiaries) from being depleted by frivolous, unreasonable, or malicious litigation brought by a single disgruntled beneficiary. They act as a deterrent against using the court system improperly and ensure that the costs generated by bad-faith actions are borne by the responsible party, not the trust itself or innocent beneficiaries.

Fee-shifting provisions serve a critical purpose: protecting the trust assets (which belong to all beneficiaries) from being depleted by frivolous, unreasonable, or malicious litigation brought by a single disgruntled beneficiary. They act as a deterrent against using the court system improperly and ensure that the costs generated by bad-faith actions are borne by the responsible party, not the trust itself or innocent beneficiaries.

Whether you are a trustee seeking to recover fees spent defending against bad-faith claims, or a beneficiary facing such allegations, these situations require skilled legal navigation. Proving bad faith involves presenting compelling evidence of the party’s motives and the unreasonableness of their actions. Defending against such claims requires demonstrating a legitimate basis for the litigation and good faith intent.

Burrey Law Group represents both trustees and beneficiaries in these complex fee-shifting disputes. We understand the high stakes and the nuances of proving (or disproving) bad faith and unreasonableness under California law.

• For Trustees: We help you document beneficiary conduct, build a strong case for fee recovery under § 17211(a) or equitable principles when appropriate, and protect the trust from unwarranted depletion.
• For Beneficiaries: We vigorously defend against unfounded claims for fee-shifting, ensuring your legitimate rights to question trustee actions are protected without facing unfair financial penalties.

Whether you are a trustee seeking to recover fees spent defending against bad-faith claims, or a beneficiary facing such allegations, these situations require skilled legal navigation. Proving bad faith involves presenting compelling evidence of the party’s motives and the unreasonableness of their actions. Defending against such claims requires demonstrating a legitimate basis for the litigation and good faith intent.

Burrey Law Group represents both trustees and beneficiaries in these complex fee-shifting disputes. We understand the high stakes and the nuances of proving (or disproving) bad faith and unreasonableness under California law.

• For Trustees: We help you document beneficiary conduct, build a strong case for fee recovery under § 17211(a) or equitable principles when appropriate, and protect the trust from unwarranted depletion.
• For Beneficiaries: We vigorously defend against unfounded claims for fee-shifting, ensuring your legitimate rights to question trustee actions are protected without facing unfair financial penalties.

While beneficiaries must hold trustees accountable, doing so unreasonably or maliciously carries significant financial risk. Likewise, trustees must defend the trust diligently but should seek fee-shifting only when truly justified.

If you are involved in a trust dispute where attorney’s fees are becoming a central issue, contact Burrey Law Group today for a confidential consultation to understand your rights and strategic options.

While beneficiaries must hold trustees accountable, doing so unreasonably or maliciously carries significant financial risk. Likewise, trustees must defend the trust diligently but should seek fee-shifting only when truly justified.

If you are involved in a trust dispute where attorney’s fees are becoming a central issue, contact Burrey Law Group today for a confidential consultation to understand your rights and strategic options.