We have talked about trustees’ fees, executors’ fees, and attorneys’ fees on this blog before…and here we go again. In Marc Alexander’s and William M. Hensley’s blog on California attorneys’ fees (which I read regularly) they mentioned a recent Fourth Circuit Appellate Court decision called Kunit vs. Kingston. Kunit involves a trustee removed from office for committing breaches of trust–happens all the time. The trustee then asked the court to be reimbursed over a hundred thousand dollars in attorneys’ fees. The trust beneficiaries naturally objected arguing that a removed trustee should receive no reimbursement for his attorneys’ fees.
The trial court decided that some of the trustee’s attorneys’ fees should be reimbursed to him out of the trust—those fees incurred for the normal administration of the trust (approximately 60% of his fee request—a little over $80,000). But the remaining 40% (about $53,000) should not be reimbursed because the Court believed that those fees were from the trustee’s defense of his own bad acts for which he is not entitled to reimbursement.
The Fourth Circuit Court of Appeals (in an opinion penned by Justice Alex C. McDonald) agreed with the trial court and affirmed the decision. This makes sense since fees incurred for trust administration are incurred for the benefit of the trust and ought to be allowed—generally speaking. While fees incurred fighting to remain trustee when breaches have occurred does not benefit the trust and should be denied (we have seen this before in other cases).
The one concern I have with Justice McDonald’s opinion is his statement that the Probate Code does not require a trustee to provide back-up information to support his accounting. The court references Probate Code Section 1061, which provides the items that must be included in a court-filed accounting, but does not expressly require back-up documentation.
While the Probate Code may not be specific, it is well established by case law in California that a trustee alone bears the burden of proving that all items in an accounting are accurate and incurred for the benefit of the trust. See Purdy vs. Johnson (174 Cal. 521) and Estate of McCabe (98 Cal. App. 2d 503). Back-up documentation is essential to establish that a trustee actually incurred a valid expense for the benefit of the trust. And the trustee alone should have the burden of providing back-up documents since he or she is the only one in possession of (or should have possession of) the documents required to prove-up the accounting. While that back-up documentation is not required when first filing an accounting under Probate Code Section 1061, it certainly is required once a beneficiary objects to the accounting.
I hope that the appellate court made this statement because both parties failed to cite to any relevant case law (not sure why because it seems obvious that they should have). But thankfully, this is an “unpublished” opinion—meaning that this case cannot be used to support future court rulings.