In this sixth installment of our series, we address the payment of legal fees in Texas trust disputes. Our previous post identified the duties trustees must follow and the consequences when they breach those duties. You may now realize you have a trust claim and need a Texas trust lawyer. But legal fees can be expensive. Thankfully, Texas rules about the payment of attorneys’ fees may ease that burden.
In Texas, the basic rule is that all parties must pay their own legal expenses. Various Texas statutes, including the Texas Trust Code, provide exceptions to this rule. These exceptions can help you pay for your trust dispute.
–General Rule. To start, in any legal proceeding to enforce the rules of the Texas Trust Code, the court may order the payment of attorneys’ fees as the judge deems equitable and just. This rule always exists, even if the terms of a trust attempt to remove it.
–Protection of Trust Property. The trustee can use trust funds to pay for legal fees incurred for the protection of the trust or its property. For example, if someone steals trust property, the trustee can use trust funds to recover that property in a legal proceeding.
–Administration of Trust Property. The trustee can use trust funds to pay for the trustee’s legal fees incurred for administration of the trust. In practical terms, that means the trustee can hire a lawyer using trust funds to advise the trustee on how to follow trust rules.
–Trust Accounting. If a beneficiary requests an accounting, the trustee can use trust funds to pay the legal fees for creating that accounting. But if the trustee fails to respond or provides a deficient accounting, and the beneficiary files a legal proceeding to his or her rights, then the court may order that either the trust or the trustee personally reimburses the beneficiary’s legal fees.
–Investment Disputes. Generally, trustees have the discretion to make investment decisions over trust property if the trustee manages the trust like a prudent investor. If a beneficiary challenges the trustee’s investment decisions, the trustee can bring a legal proceeding to exonerate him or herself and use trust funds to advance the trustee’s legal fees for this proceeding. At the end of this proceeding, the judge will divide responsibility for all sides’ legal fees. For example, the judge may order that trust funds will cover the fees of both the trustee and the beneficiary. Or the judge may decide that the trustee’s own personal funds will reimburse the legal fees paid by the trust and the beneficiaries. The judge could even decide that the beneficiary reimburses the trust for the trustee’s legal fees.
–Settlement Agreement. Like most legal cases, trust disputes are often resolved by settlement between the parties. In the ensuing settlement agreement, the parties can allocate payment of attorneys’ fees in any manner that they all agree to. For example, the parties may agree that the trust pays all parties’ legal fees. Or they can limit how much of the legal fees are reimbursed by the trust and how much must come out the parties’ own pockets.
There are both rules and gray areas about payment of attorneys’ fees in Texas trust disputes. The circumstances of your case will affect the ultimate outcome. A Texas trust lawyer can help assess those circumstances and advise you on likely outcomes. The Johnson Firm regularly assists clients in Dallas, Fort Worth, and throughout Texas, including the pursuit of attorneys’ fees in trust disputes. If you need assistance with a Texas trust dispute, please contact us today.