Can a Trustee Use Trust Funds to Pay Attorney Fees in California?

Yes, with a condition on every dollar. A California trustee can hire a lawyer without asking anyone, and the trust pays for trust work: administering it, accounting for it, protecting its assets (Probate Code §§ 16247, 16243, 15684). The trust does not pay for your fight over your own share, or for defending a breach you committed. Every payment can be reviewed when your account is settled, so the honest answer on trustee attorney fees is yes, on a running tab the judge can reopen.

Here's the thing. Most family trustees hire an attorney for trustee work first and ask who pays second. The mistake is step three: the trust pays for everything, including the letter telling your sister she was never getting the Los Gatos house. That letter is yours, and so is the bill.

When can a trustee pay attorney fees from the trust?

The powers are broad. You may hire attorneys "to advise or assist the trustee in the performance of administrative duties" (Probate Code § 16247). You may pay the expenses of the "collection, care, administration, and protection of the trust" (Probate Code § 16243). You may defend actions "for the protection of trust property and of the trustee in the performance of the trustee’s duties" (Probate Code § 16249).

The money statute is the one on trustee reimbursement. The trust repays "Expenditures that were properly incurred in the administration of the trust" (Probate Code § 15684). Expenses that were not properly incurred come back only "To the extent that they benefited the trust." If you advanced your own money to protect the trust, you hold a lien for it (Probate Code § 15685). Proper, or beneficial, or yours.

Reviewed by whom? In Santa Clara County, the probate court in San Jose settles your accounts, passes on your acts, and reviews your compensation (Probate Code § 17200). Paid now is not the same as kept.

How do courts decide whether legal fees benefited the trust?

The cases draw one line. A trust pays for litigation that "is a benefit and a service to the trust" (Whittlesey v. Aiello).

The other side of the line is a fight over who gets the trust. In Whittlesey the trustee lost his defense of an amendment that moved the benefits from one family to another, and his lawyers were denied trust funds because "it was a dispute over who would control and benefit from it" (Whittlesey). Terry v. Conlan said the same to a trustee-daughter who took her siblings' side against their father's widow: "she must bear her own costs in this litigation, rather than be reimbursed from the trust."

In Zahnleuter v. Mueller the trustee spent $201,164.15 of trust money defending an amendment contest. The surcharge was affirmed: he "did not participate in the litigation as a neutral party to defend the trust and protect its assets." A trustee caught between beneficiaries "may not use trust assets to defend the claim of one party against the other" (Doolittle v. Exchange Bank). The exception is a document that expressly directs the trustee to defend contests at trust expense, and even then the contestant can ask the court to stop it.

A worked example: Mom's Los Gatos house, three siblings, and an amendment signed six months before she died that gives you the house. Your sister contests it. Defending the amendment is a fight over who benefits, so those fees are yours unless the document says otherwise. Insuring the house, preparing the accounting, and sending your sister a copy of the trust are administration, payable from the trust subject to review. Same lawyer, two bills.

Who pays legal fees in a trust dispute?

One note on the removal row: Whittlesey has a broad sentence saying a removal or surcharge fight benefits the trustee, not the trust, and later cases read it narrowly. A successful defense is "generally chargeable against the trust even though the trustee personally benefits as a result" (People ex rel. Harris v. Shine). Hollaway v. Edwards explains why: clearing the charges "also benefited the trust by eliminating charges raising serious questions about whether she had and could continue to administer the trust properly."

An unsuccessful defense is not chargeable (Estate of Cassity). The exception is narrow: you must show you "subjectively believed that the expense was necessary or appropriate to carry out the purpose of the trust and that belief was objectively reasonable" (Conservatorship of Lefkowitz).

Can the trust pay a trustee's legal fees during litigation?

The most common mistake: the trustee pays the defense lawyer from the trust every month, assuming it will sort itself out. It does, in the surcharge order.

The law on interim fees is unsettled. Kasperbauer v. Fairfield let a removed trustee pay his accounting lawyers from the trust "as those fees are incurred," with a true-up at the end if the beneficiaries proved a breach. Shine reversed an order advancing a trustee's defense fees while a removal and surcharge petition was pending. The court must first "assess the probability that the trustee will ultimately be entitled to reimbursement," then balance the harms to everyone. An interim award "will seldom be justified" where the trust is silent on interim fees and the trustee's conduct is the issue.

So the court decides case by case. Expect to justify every interim payment, and to repay it if ordered.

The practical rule: two engagement letters, one for trustee work billed to the trust, one for advice about your own exposure billed to you. The privilege follows the money. A successor trustee inherits the privilege over administration advice, and advice about your own liability stays yours only if you hired "a separate lawyer" and paid "out of its personal funds" (Moeller v. Superior Court). Our guide on what to do when a beneficiary threatens to sue has more.

What happens to attorney fees if the trustee breached the trust?

The court will look at your own conduct before it looks at your invoices. A trustee who committed a breach of trust is chargeable with the trust's loss with interest, any profit the trustee made, and any profit the trust missed (Probate Code § 16440). Interest runs at the legal rate on judgments (Probate Code § 16441). Fees the trust paid for a fight that was really yours are a loss to the trust, which is how Zahnleuter's $201,164.15 became a personal debt.

Your own pay is exposed too. A beneficiary can petition "To reduce or deny compensation of the trustee" (Probate Code § 16420). "Compensation may be reduced or denied where the trustee acts negligently or in breach of the trust" (Estate of Gump). Oppose an objection to your account "without reasonable cause and in bad faith," and the objector's fees can be charged against your compensation and you personally (Probate Code § 17211). Refuse the adult beneficiaries' request to hand off to a trust company, then lose the removal petition, and the petitioner's fees can land on you (Probate Code § 15645).

A breach is not automatic forfeiture. The court may excuse a trustee who "acted reasonably and in good faith," in whole or in part (Probate Code § 16440). A total denial of fees was reversed where some surcharges stuck, because a surcharge "is not, in itself, grounds for completely denying him compensation and expenses" (Estate of Cassity). The limit is self-interest: there is no authority to excuse "a trustee who acted in bad faith by serving his own interests" (Uzyel v. Kadisha). Honest mistake, defensible; self-dealing, not.

How much in attorney fees is reasonable for a trust?

Even fees that are properly for the trust must fit the trust. Donahue v. Donahue sent some $5 million in a former trustee's fees back to the trial court. Trust law imposes a "double-barreled reasonableness requirement," the court said: the fees must be "reasonable in amount and reasonably necessary to the conduct of the litigation," and "reasonable and appropriate for the benefit of the trust" (Donahue). The question to ask before the first invoice: did the trustee demand a "Rolls Royce defense" when a Buick would have gotten there?

Trust attorney fees are judged against the size of the trust. A $400,000 fee fight over a $600,000 trust ends badly for everyone, and the trustee who ran it holds the bill. Bay Area hourly rates make this real fast.

Proportionality also means proof. Zahnleuter's accounting listed a payee and the words "Attorney Fees" on each line, with no description of the work. The trustee bears the burden of proving every charge. Our guide to preparing a trust accounting that holds up shows the format.

What should a trustee do before paying a lawyer from the trust?

1. Sign two engagement letters: trustee-capacity work billed to the trust; personal-capacity advice billed to you.
2. Get monthly invoices with a description on every line, and book the trust-side invoices as you pay them.
3. Disclose every agent you hired and what you paid them in each account (Probate Code § 16063). A notice of proposed action cannot approve your fees or your lawyer's (Probate Code § 16501).
4. Before paying your own defense from the trust in a removal or surcharge case, ask the court; our removal petition guide explains that case.
5. Keep the spending proportionate to the trust, and write down at the time why each step served the trust. The rest of the job is in our California trustee duties checklist.