(This article was originally posted at the California Trust Estate and Probate Litigation website – http://www.californiatrustestateandprobatelitigation.com/)
By Michael A. Hackard and Quinn Chevalier
The emotional and financial costs spawned by a trustee removal fight can be overwhelming. Beneficiaries often feel much maligned or even cheated. In these broken and volatile relationships, beneficiaries don’t want a trustee to go away mad, they just want them to go away. Often feeling chosen, duty bound or privileged by their appointed status, trustees do not easily surrender their reins of power. However inept, embedded trustees often threaten the rapid dissipation of trust assets by burgeoning legal bills.
The Costs of Trustee Removal: a zero sum game
We have seen the trust dissipation threat in action. Attorneys who litigate trust disputes enjoy the challenges and intricacies of trust law. This enthusiasm is understandable. Ethical rules provide guideposts for aggressive and fair representation. Threatening to ravage trust assets to pay for the defense of an errant trustee does not fit well within these guideposts.
While trustees are entitled to defend charges of alleged wrongdoing, the payment for the defense should be fairly allocated to the trust or to the trustee. The trustee and his/her attorneys should initially and periodically assess whether the asserted defenses are meant for the trust’s advantage versus those meant for the personal benefit of the trustee. However inconvenient and frustrating to often bereaved beneficiaries, it can take years before a court determines whether trust payments for attorney’s fees were spent to protect the interests of a flawed trustee or the interests of the trust.
Affronted beneficiaries willing to litigate a trustee removal action should be ready for the time delays and legal expenses common to the wrangling over the peculiarities of trust law and administration. California courts have experienced severe budget cuts and have responded accordingly by closing courtrooms and terminating employees. The time lags from the filing of a petition for removal to an evidentiary hearing can easily be a year or more. Petitions for appointment of interim trustees face higher legal hurdles. Courts are reluctant to appoint interim trustees absent clear wrongdoing that puts the trust or its beneficiaries in great peril.
Attorneys hired to pursue or defend trust litigation have obligations to the court as well as to their clients. Professionalism can often support a call to be “above the fray,” yet the realities of exhausting litigation can affect the most stable of constituents, and particularly the trustees. It is not unusual for trustees to be totally unprepared for the tasks required after the death of a settlor. Affected beneficiaries, while not knowing the specific tasks required for trust settlements, can still readily observe that the trustee’s actions or inactions epitomize “amateur hour.”
The Nuclear Option: destroying both victor and vanquished
Trust litigation contains the risk of “catastrophic victory.” Such victory can evolve from multiparty litigation that includes trustees, co-trustees, successor trustees, proposed independent trustees, beneficiaries, spouses of beneficiaries and their respective counsel. Litigators on their own initiative or that of their clients can engage in “scorched earth” tactics designed to enrage and exhaust their opponents. Such tactics often have the same effects as short range nuclear weapons, destroying both the victors and the vanquished.
Catastrophic victory aside, the removal of a trustee by its nature involves a good deal of energy. Trust provisions, statutes and case law provide a laundry list of reasons for the removal of a trustee. Clients can look at the list and mentally check the appropriate boxes. Believing, knowing, and proving, however, are three different things. The belief of trustee wrongdoing can be followed by informal and formal discovery that translates belief into knowledge. Transferring knowledge into judicial proof is a different process – one protected by rights of due process and time constrained by discovery processes, court schedules and statutory mandates.
The Undue Burden of Due Process of Law
In trust litigation, just like any litigation, writing a letter to a local court detailing what you know does not meet the demands of judicial due process. This is something not always understood by clients. In other aspects of their lives, changes can often be more timely and directly influenced by vigor and clarity of purpose. Such is not always (or ever) the case in litigation. We have all heard a variant of “the wheels of justice grind slowly.” There is truth behind the aphorism. This truth particularly tests the patience of wronged beneficiaries. Trustee fights can mimic civil war with all of its emotions and tragedies. Trust litigators are best when they can fairly and wisely advance their clients’ interests while at the same time exercise vigilance for opportunities of fair compromise or settlement. Litigation should not be a mindless and hardened exercise in wealth dissipation. As litigation battle lines are fixed and change, the end game should always be kept in mind. Catastrophic victory is no victory at all.
© Copyright Michael A. Hackard and Quinn Chevalier, 2012. All rights reserved. Hackard Law, 10630 Mather Boulevard, Mather, California 95655