October 13, 2011

Trust Contest

A common complaint I hear is that of a disgruntled beneficiary who believes that they have been cheated or defrauded out of their inheritance. Still, litigation in the trust field is not the easiest endeavor. Unlike garden-variety civil litigation such as a breach of contract action, trust litigation is characterized by a few distinguishing features that make it very arduous typically. The following is a brief overview of the characteristics that make trust litigation even more difficult than regular civil litigation.  

Nature of Litigants

In the typical civil litigation case, the plaintiff and defendant lack a connection to each other. Even if the litigants were previously-connected, the onset of litigation will most like sever any ties between the two parties. 

In contrast, the litigants in a trust action are almost always family members. When the litigation ends, eventually, the parties will not be able to part ways and embark on two mutually exclusive paths in life. Instead, the litigants will still remain related. You cannot sever blood ties no matter how hard you try. Thus, these bitter litigants will see each other at every family wedding, holiday, birthday, etc. going forward. Conversely, in regular civil litigation, the plaintiff and defendant will not be connected to each other on the same level as family member litigants. These civil litigants will not frequent the same social circles, or at the very least, not on the same level as family member litigants.

Pyrrhic Victory

A Pyrrhic victory can be loosely applied to many trust litigation matters as litigants can win the battle but ultimately lose the war. The following hypothetical illustrates this point.

Assume in 1982, Samuel created a trust for the sole benefit of his daughter Belinda and named his brother Thomas as trustee. Samuel funds the trust solely with a rental property. Over the years, Belinda becomes increasingly frustrated with Thomas’s handling of the trust property. Thomas does not adequately maintain the roof, lets the plumbing become outdated and rents the unit to yokels who terrorize the neighborhood with their back-country lifestyle habits. 

However, Thomas is operating under a tight budget and has to very carefully expend money on the property. During this time, Thomas never once believed he was acting imprudently. Nevertheless, Belinda sues Thomas as trustee of her father’s trust in Santa Clara Superior Court for breach of trust in 2011.

A significant drawback for Belinda’s suit is that Thomas is obligated to defend the trust as required by California law. Prob C §16011. Consequently, Thomas is allowed to expend trust funds to defend the lawsuit against the trust, namely hire an attorney to defend the suit. Even if Thomas ultimately loses the suit, he could charge the attorney fees to the trust if he acted in good faith. Copley v Copley (1981) 126 CA3d 248. Moreover, if Belinda were to win her lawsuit, it is unlikely that she could recover her attorney fees from the trust. Estate of Gump (1982) 128 CA3d 111. The end result is that Belinda could win the lawsuit but acutely deplete the amount of her inheritance, a Pyrrhic victory, as attorney fees incurred by Thomas’s defense of the suit could take a huge chunk out of the trust as trust actions can easily reach six-figures if a case goes to trial and is appealed.


As is the case with any litigation matter, legal fees can rack up rather quickly. The cost of discovery, namely depositions and interrogatories, for a trust matter can be quite extensive. For example, a common reason to question the legal validity of a trust is by arguing that the document was product of “undue influence.”

Undue influence is conduct that replaces a person’s will with that of another, causing a disposition different from that which the person would have made if permitted to follow his or her own inclinations. Estate of Baker (1982) 131 CA3d 471, 480. California case law has held that the following are signs of undue influence: (1) provisions that are unnatural, cutting off from any substantial bequests the natural objects of the decedent's bounty; (2) dispositions at variance with the decedent's intentions, expressed before and after the document's execution; (3) relations existing between the chief beneficiaries and the decedent that afforded the former an opportunity to control the testamentary act; (4) a testator whose mental and physical condition was such as to permit a subversion of his or her freedom of will; and (5) a chief beneficiary under the trust who was active in procuring the execution of the instrument.

Thus, if a trust contestant believed that a person’s trust was the result of undue influence, he or she would have to marshal enough evidence to prove the five aforementioned elements of undue influence. This is by no means an easy task because you essentially have to demonstrate the person was fine until a malevolent person came into their life and wrecked their estate plan by altering it. While it is not necessarily difficult to spot undue influence, proving undue influence is another issue. In other words, undue influence is often good in theory but cumbersome in application.