WINNING Pa. PLAINTIFF PAYING DEFENDANT'S LEGAL FEES?

[trutester]

I just won a PENNSYLVANIA petition against ABC Trust to dissolve and distribute the funds of a trust to my sister and me, as we were the last surviving beneficiaries. But the attorney for ABC TRUST wants me to pay their legal fees of over 60k?. I don't feel this is proper. Oddly, my attorney also says its OK to pay the fees now, then sue them later. Of course, if I agree to this and settle then my attorney gets paid now too, not to mention they'll get paid again when we sue ABC for this and other surcharges. So before we go into our last hearing, I would like to say, No. Not going to pay ABC legal fees. ABC Trust is going to pay out the full amount of the trust with NO legal fees deducted. I believe it is fair and reasonable to make ABC bear the burden of its OWN legal fees. Further, the trust does not specify that trust dissolution costs should be deducted from the trust. If we had lost, sure, I can see ABC trying to recoup for an unnecessary litigation. But in this case, this is their cost of doing business. Not to mention, they lost.

QUESTIONS
1.Do you agree that ABC should pay their own legal fees?

2.Is it highly unusual for the winning plaintiff to pay for the defendants legal fees?

3.What does this tell you, if anything, about my legal team?

Will me refusing to agree to ABC paying their own legal fees likely further delay the already 8-month-delayed dissolution of the fund for a very extended time frame? Or can the judge rule and tell ABC Trust to sue us later for these fees, and make them pay up now, sans legal fee deductions? QUESTION Can the judge make defendant pay their own legal fees at this hearing? Thanks,

 

[Zigner]

I think you're out of luck either way. If you pay the fees, then you're out the money, but you get the full amount of the trust. If you don't pay the fees, then the fees will be paid from the trust funds, which means your distribution will be less.

 

[Taxing Matters]

I believe it is fair and reasonable to make ABC bear the burden of its OWN legal fees.

Here is the problem with these situations. The trust pays those expenses from the assets of the trust — the assets you'd get when the assets are distributed upon liquidation of the trust. It has no other place to get the money if you don't pay those fees. If the trust does not have the liquid cash to do that, it has to sell trust assets to get the money. That sale might not be in your best interests. The bottom line is that as you and your sister are the beneficiaries, this means ultimately those fees are coming out of your pockets either way.

 

[PayrollHRGuy]

Here is the problem with these situations. The trust pays those expenses from the assets of the trust — the assets you'd get when the assets are distributed upon liquidation of the trust. It has no other place to get the money if you don't pay those fees. If the trust does not have the liquid cash to do that, it has to sell trust assets to get the money. That sale might not be in your best interests. The bottom line is that as you and your sister are the beneficiaries, this means ultimately those fees are coming out of your pockets either way.

And someone really should have told the OP that before he took the action he took.

 

[Zigner]

...the trust does not specify that trust dissolution costs should be deducted from the trust.

I gotta ask - who else would you expect to pay those costs?

 

[Taxing Matters]

And someone really should have told the OP that before he took the action he took.

When it comes to beneficiaries contesting wills and trusts this is one of the things I make sure to tell them about at the start so that they understand the costs involved if they want to aggressively litigate it.

 

[trutester]

I gotta ask - who else would you expect to pay those costs?

I would expect the trust to pay for its own legal expenses from the healthy six figures it has earned over the past 55 years of management fees. It manages billions in holdings. It fought a legal battle on its own behalf; not mine, not the trust's. These were not fees incurred in the day-to-day management of the trust - for which it has been paid handsomely; but for its own self-preservation; to prevent loss of income-generating-assets.

 

[Zigner]

I would expect the trust to pay for its own legal expenses from the healthy six figures it has earned over the past 55 years of management fees. It manages billions in holdings. It fought a legal battle on its own behalf; not mine, not the trust's. These were not fees incurred in the day-to-day management of the trust - for which it has been paid handsomely; but for its own self-preservation; to prevent loss of income-generating-assets.

I'm sure you mean that you expect the trustee to pay for its own legal expenses, not the trust.

If you sued the trust (as you indicated in your initial post), then the trust has to pay for its own defense.

 

[trutester]

You're right. I sued the trustee. Good point. Will use this insight!

 

[Zigner]

You're right. I sued the trustee. Good point. Will use this insight!

No, you sued the trustee in his capacity as trustee of the trust. (At least, that's where my wager lies.) Talk to your attorney.

 

[LdiJ]

No, you sued the trustee in his capacity as trustee of the trust. (At least, that's where my wager lies.) Talk to your attorney.

I dunno, the OP does not seem to indicate that the trustee mismanaged the trust, but rather that the trustee refused to distribute the trust because the trustee wanted to continue to earn fees from the trust. If that is the case, then the fact that the OP won the case would tend to indicate that the trustee had no valid reason not to distribute the trust, therefore no valid reason to expect the trust to pay the trustee's legal fees.

 

[Taxing Matters]

I would expect the trust to pay for its own legal expenses from the healthy six figures it has earned over the past 55 years of management fees. It manages billions in holdings.

No, you are mixing terms. You are referring to the trustee, not the trust. The trust is the entity that holds the assets you are going to get when it liquidates. The trustee is the person or entity that manages the trust. The trustee is not generally personally liable for the expenses incurred by the trust, including the legal fees for actions the trustee brings or defends on behalf of the trust. There are some exceptions where the trustee would have to pay out of its own pocket, but that generally requires proving the trustee breached its fiduciary duty to the trust.

It fought a legal battle on its own behalf; not mine, not the trust's. These were not fees incurred in the day-to-day management of the trust - for which it has been paid handsomely; but for its own self-preservation; to prevent loss of income-generating-assets.

Sorry, but an action to liquidate the trust early (which what I'm assuming you brought) is indeed an action against the trust, not the trustee personally, and the legal fees for that get charged to the trust — and paid out of the trust assets that are going to you — not fees that are charged to the trustee personally. It is this fact that makes litigating these sorts of things tricky; sometimes its better to take a settlement for something less than you might get if you win simply to avoid paying out even more in your legal fees and having your trust assets reduced by the trust's legal fees.

Ask your lawyer if there is a strong basis here for the trust not to pay the fees and instead make the trustee pay the fees. But absent a good case for breach of fiduciary duty I think it unlikely that you'd have a good case for that. And, of course, pursuing that would mean even more legal fees to litigate it through.

 

[Zigner]

I dunno, the OP does not seem to indicate that the trustee mismanaged the trust, but rather that the trustee refused to distribute the trust because the trustee wanted to continue to earn fees from the trust. If that is the case, then the fact that the OP won the case would tend to indicate that the trustee had no valid reason not to distribute the trust, therefore no valid reason to expect the trust to pay the trustee's legal fees.

You flip back and forth twice here. Read what you wrote again - it doesn't make sense.
Taxing Matters has a much better handle on this.

 

[LdiJ]

You flip back and forth twice here. Read what you wrote again - it doesn't make sense.
Taxing Matters has a much better handle on this.

I agree that my wording was a bit odd, but basically I was saying that the story did not rule out a possible breach of fiduciary duty by the trustee.