Probate: Residual Trust Beneficiary Entitled To Rounded $102,800 In Fees/Costs From Co-Trustee, Payable By The Trust But 80% From Future Trust Distributions To Co-Trustee (Also A Beneficiary)

Probate Code’s Equitable Principles Supported The End Result.

 

            In Gorman v. Lavery, Case No. B271527 (2d Dist., Div. 6 Sept. 18, 2017) (unpublished), a probate court awarded $101,787.26 in attorney’s fees and costs to a residual trust beneficiary against a co-trustee/other trust beneficiary relating to mismanagement of a family trust after a breach of trust claimed settled for $975,000.  The probate court found that a “lion’s share” (roar!) of the fees and costs should be borne by the losing co-trustee/residual beneficiary trying to obtain a great share of trust distributions, ordered that they be paid out by the trust but with 80% of the expenses to be allocated to losing beneficiary’s future trust distributions as a residual beneficiary of the trust.

            The fee award was affirmed by the 2/6 DCA on appeal.

          Because Probate Code section 17206 vests the court with discretion to surcharge the losing beneficiary’s trust interest, there was nothing wrong with the eventual award.  Loser argued that bad faith conduct needed to be shown as a predicate for a surcharge order, Estate of Beach, 15 Cal.3d 623 (1975), but this was shown through substantial evidence.  Finally, loser argued that his future trust distributions were immune from surcharge, drawing this response from the appellate court:  “That is nonsense,” citing several cases including Chatard v. Oveross, 179 Cal.App.4^th 1098, 1100-1101, 1108 (2009) to the contrary.

 

Photo credit:  Carol M. Highsmith.  10-14-16.  Library of Congress.