When the trust pays...

[letstalk]

My family has been involved in a two year battle regarding a house. The short story is my aunt left an oceanfront property to our family, to be lived in by a family member and to be subsidized by the trust. One cousin moved in 30 years ago. Aside from his never, ever inviting a family member there over the past 30 years, and there are 16 benefiiciaries, the majority of the family felt that a disproportionate amount of the trust went to the cousin who's living there. The final result of these two years was a lease, and much more accountability on his part. So those are good things.

Now, a year after the conciliation meeting, and two years after this legal issue began, this family member is demanding the trust pay his legal bills.

The two major trustees, seem to very much want this over, and say that a judge will rule in this cousin's favor. Is that true? This cousin is a poster child for entitlement. He also gets the largest amount of the trust anyway, because he had no brothers or sisters.

The family members have been asked to sign off on this agreement. I would sign off, if not for this issue. I also have no idea how much we're talking about, but maybe it doesn't matter. My concern is this not a huge trust and whatever this amount may be, is going to drain a lot of it. Plus the cousin started this fight, took the trustees to court and now wants to be reimbursed for all of it. What a country!

 

[tranquility]

You have given nowhere near enough facts to base an opinion on. However, when a beneficiary challenges the trustee in court over something related to the trust he will usually be awarded attorney fees if he wins. While most issues never get to judgment, all settlement agreements I've seen have some provision regarding attorney fees and there is often a responsibility related to the amount of "fault" on which the parties agree.

 

[Dandy Don]

This beneficiary took the trust to court for what reason?

 

[letstalk]

Trust dispute

I forgot to say we're in Massachusetts. I believe you know about this, as you helped me with an analysis two years ago. And it was very helpful.

The issue is that my aunt left this 4 million dollar oceanfront property, subsidized by the trust, which was to be used by a family member. My cousin moved in 30 years ago and had a wonderful inexpensive deal until about three years ago, when the trustees requested an updated appraisal. The cousin had been paying $1000/month for almost 28 years, until our family requested an updated appraisal.

By the time this issue got to court last June, our estimate of his paying $5000 month had to come down, since the real estate market/value of the house had started to decline. The judge ruled that this cousin needed to increase his rent to $3500/month in order to cover costs and live there. At least he had to be accountable, and there had been speculation that he used the trust funds to build an addition, so he could sublet to a relative. (actually it's true, but the trustees hadn't stipulated that in the terms).

So for the past year, the lawyers have been working on lease terminology, which is why we're here now. They have sent us the agreement, to sign off on. There is no problem with the terms, but one line requests that the trust cover this cousin's legal fees, which are about $40K. I have a big problem that he lives in this huge house, he gets way more trust income than anyone else and now wants the (not so big) trust to cover his fees.

Given what my aunt had wanted, it is difficult to see one beneficiary benefit so much more than the rest (there are 15) Both trustees have told me they think a judge will side with him, since he was really challenging the verbiage of the initial trust. Do you agree? I do no want to drag this out any longer either, but it seems wrong that the bad guy keeps winning.

 

[seniorjudge]

I think it would be very unusual for the trust to have to pay these legal bills.

But, you know, I thought OJ was guilty!

 

[Dandy Don]

Exactly what is his side agreeing to or what are they giving up? If you don't like that clause, then object and send it back to have it taken out.

 

[letstalk]

Agree or Give Up

What was sent to all of us, is a copy of the lease agreement and stipulations from this cousin's lawyer about visitation, rent review, appraisals etc. Both trustees seem to think we should agree to the $40K reimbursement of his legal fees and get this over with. But given that he already lives in this 4 million dollar house, subsidized by the trust and in addition to the $150K he gets annually in trust income, he's getting way more than any other beneficiary.

What do you think? I have not signed off on this yet (d/li May 31) and I am inclined to go another $5K in legal fees by taking this to a judge. The bad guy can't keep on winning.This is what the trustee wrote me a couple of days ago......

'It is customary that when there is a question regarding the interpretation of the trust instrument, the trust bears the expense of the legal costs. That is one reason to attempt to settle such matters rather than go to trial and have the cost further driven up. The risk in this case is that the issue does not get resolved at this stage, resulting in more court appearances and ever higher legal fees to be borne by the trust.'