Trusts may be harder to challenge in court than simple wills, but they often remain the cause of legal controversy. People with an interest in the trust may file a lawsuit asking the courts to take specific actions.
There are many reasons that interested parties initiate trust litigation. In some cases, creditors may question if a transfer of resources to the trust was fraudulent. Other times, there could be concerns about the trustee engaging in self-dealing, embezzling from the trust or failing to follow the instructions provided by the grantor who funded the trust.
Trust litigation can take months to resolve and can generate tens of thousands of dollars or more in legal costs. Who typically absorbs the expenses of trust litigation?
The trust often pays
The reason for trust litigation and the outcome of the court case can influence who ultimately pays for court costs and legal representation. Generally speaking, trustees can rely on the trust to cover the costs generated by trust litigation, including the cost of legal representation.
Unless a plaintiff prevails and manages to convince the courts that the trustee breached their fiduciary duty, the trustee generally does not need to worry about incurring direct financial responsibility for the cost of trust litigation. However, should the other party prevail, the courts could potentially order the trustee to personally cover the cost of litigation.
Those responding to defend a trust or their actions while administering a trust often need legal guidance to navigate the trust litigation process effectively. People may feel more comfortable retaining legal support when they understand that trust resources often cover the costs of resolving disputes in court.