When administration of a trust does not go smoothly, the trust may end up in litigation. In court cases involving a trust, a common question concerns whether the trustee (or the other party) can recover attorney’s fees in trust litigation.
Early in 2019, the Minnesota Court of Appeals handed down an important decision that clarifies how a district court determines whether to award attorney’s fees in trust litigation. Minnesota statutory provisions and common law rules in court decisions provide the standards.
On January 14, 2019, the Minnesota Court of Appeals issued an opinion in the case of Lund v. Lund. The decades-long court case relates to trusts involving businesses owned by the family known best for Lunds & Byerlys grocery stores.
The litigation and decision involve a number of complex issues. One central issue relates to the trustee’s entitlement to attorney’s fees for defending against the litigation. In reviewing the lower court’s decision concerning the fee award, the Court of Appeals clarified current Minnesota law on attorney’s fees in trust litigation.
There are two different provisions in Minnesota statutes that relate to attorney’s fees in trust litigation. The first, adopted as part of the new Trust Code in 2016, is Minn. Stat. §501C.1004, which provides:
In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party from the trust that is the subject of the judicial proceeding.
The second section is Minn. Stat. §501C.0709, which states in part:
(a) A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for:
(1) expenses that were properly incurred in the administration of the trust; and
(2) expenses that were not properly incurred in the administration of the trust, to the extent necessary to prevent unjust enrichment of the trust.
Minnesota courts have long recognized a trustee’s common law right to recover reasonable attorney’s fees incurred in good faith in defending the administration of the trust. Under that court-established rule, if a trustee acts in bad faith or is guilty of fraud or inexcusable neglect that resulted in loss to the estate, attorney’s fees may be denied.
In the Lund decision, the Court of Appeals stated definitively that Minn. Stat. §501C.1004 does not replace the common law rule regarding trustee entitlement to attorney’s fees. The Court clarified that Section 501C.1004 applies only to the ability of third parties and beneficiaries to recover attorney’s fees.
The decision also established that Minn. Stat. §501C.0709(a) codifies the established common law standard regarding a trustee’s recovery of fees and leaves it undisturbed. The opinion made it clear that both the statute and previously enunciated common law rules apply to a trustee’s entitlement of attorney’s fees in trust litigation.
The standards that apply to awarding attorney’s fees in trust litigation in Minnesota are now clear under the Lund decision. A district court will apply statutory and common law standards to determine whether a trustee or other party will receive attorney’s fees.
Minnesota appellate courts do not reverse a district court’s decision on attorney’s fees absent an abuse of discretion by the district court. The Court of Appeals reiterated this rule in a decision in June 2019 (In re the Trust of the Charles W. J. Curry Trust Dated June 5, 1991, as amended).
In the Curry case, the Court of Appeals reviewed denial of an attorney’s fee award to the beneficiary who filed the trust litigation. The Court applied the common law standard previously articulated by Minnesota court decisions. That standard provides that a court may award attorney’s fees to a beneficiary (challenging party) when the fees are “incurred in good faith in litigation brought and prosecuted for the benefit of the estate.”
While the standards under statutes and common law differ slightly for a trustee and a challenging party (who often is a beneficiary), the rules are very similar. The district court makes the determination based on the facts of each individual case.
The standards that the district court applies in determining whether to award of attorney’s fees require the court to look closely at facts produced in court during the trial. To award attorney’s fees, the court must find a demonstration of good faith by the trustee or challenging party. In the absence of good faith, the court may deny the award.
In trust litigation, if both the trustee and party filing the action meet the statutory and common law standards, the court may award attorney’s fees to both sides of the case. This means that an important part of the trust litigation attorney’s role — whether representing a trustee or filing party — involves establishing the requisite good faith and meeting the standards for receiving an award of attorney’s fees. An experienced trust litigation attorney understands the statutory and common law standards, as well as the need to meet those requirements when presenting the case to the court.
At the Dave Burns Law Office, a primary focus of my practice is trust and probate litigation, including trust administration disputes and cases involving allegations of breach of fiduciary duty. I work with trustees, settlors, and beneficiaries of trusts and estates.
If you are a trustee, beneficiary, or settlor needing assistance with any type of trust dispute or litigation matter, I welcome you to contact me at (612) 677-8351 or by emailing firstname.lastname@example.org. I welcome inquiries from clients and referring attorneys throughout the State of Minnesota and am available to meet with clients in both Minneapolis and St. Paul.
The Dave Burns Law Office hopes you find this article helpful. But please do not rely on it as legal advice. The law changes regularly and the outcome of any legal matter depends on its unique circumstances. View full disclaimer