Assume your client comes to you, an elder law attorney, and explains that she has discovered that her mother, who has been suffering from numerous medical ailments and dementia, has amended her long-standing trust to disinherit your client, her only child. For years, the trust provided that your client was to receive all her mother’s assets, including the family ranch in Napa, California. Her mother was clear that she wanted the ranch to remain a ranch rather than be used as a vineyard. The new beneficiary and trustee of the trust is a younger man who began dating your client’s mother after her husband died. Your client believes that this man manipulated her mother into changing her estate plan. The client is particularly worried that the alleged wrongdoer is improperly transferring assets out of the trust. The client was informed that a realtor has been hired to sell the ranch, which is being marketed as a vineyard and winery. Your client wants to preserve as much of the estate as possible, especially the ranch, while challenging the amendment to the trust and the appointment of this man as trustee. How do you stop the assets from disappearing and contest the trust amendment?
Alternatively, assume you are representing an adult child trustee and beneficiary of a family trust. A sibling who has been estranged from the family for years suddenly reappears and challenges a trust amendment that was created to disinherit her because she told the parents that they were “dead” to her. Your client believes the sibling’s claim is meritless but is worried that the expense of litigation in defense of this claim will be a financial drain on the trust. How can you help your client defend the challenge to the amendment while avoiding prolonged and expensive litigation?
These situations highlight a few of the many practical hurdles elder law attorneys must overcome when representing clients in trust litigation cases involving issues of undue influence, elder abuse, and lack of capacity. Protecting assets from disappearing during the course of litigation is complicated, especially in situations in which a beneficiary is also the acting fiduciary and can use trust assets to defend a challenge to an amendment or trustee’s actions. Disposing of meritless claims early in the litigation process is necessary to limit expenses to the trust estate and avoid years of unpleasant conflict.
This article provides an overview of the methods and tools available to you to help your client succeed in trust, estate, and elder abuse litigation. Specifically, this article examines methods for disposing of claims early in the litigation process, securing trust assets, removing and suspending a trustee, and using other tools to avoid protracted and expensive litigation. Each method and tool is outlined in detail.
II. Methods and Tools for Trust, Estate, and Elder Abuse Litigation
A. Method 1: Develop a Litigation Strategy
At the outset, you are advised to develop an overall litigation strategy to determine which tools from the toolbox to use. This usually involves the following process: 1) listing every claim involved in the case; 2) determining the legal elements for each claim, whether statutory or common law; 3) determining the legal (not factual) defenses to each claim; and 4) listing what evidence you currently have to support or defeat each claim and what evidence likely will be needed. You can then determine what steps need to be taken to efficiently and economically pursue your client’s goals.
Before taking any action, review the terms of the trust and determine whether it contains a no-contest clause. A no-contest clause is a provision in an estate planning instrument that potentially disinherits a beneficiary for contesting that instrument in court. In some states, determining whether there is a violation of the clause is addressed at the preliminary stages of a case. It is recommended that you determine how your jurisdiction treats such clauses and how it may affect the outcome of the case.
B. Method 2: Use Pleading Attacks and Dispositive Motions
One way to gain an advantage from the outset of litigation is to use a pleading attack. The primary purpose of this tool is to dispose of meritless claims and defenses early. The attack can be made against the petition/complaint, to respond to pleadings/answers, or to respond to specific claims and affirmative defenses. Grounds for pleading attacks include time bars (legal and equitable), failure to allege facts to state a claim, and lack of standing.One common pleading attack is the motion to dismiss, also known as the demurrer in some jurisdictions. A motion to dismiss is a pleading used to test the legal sufficiency of an opposing party’s pleading. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading (complaint, petition, answer, or cross-complaint). The standard for a motion to dismiss requires that “a complaint … contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” This tool is used to obtain an early determination of a plaintiff’s right to proceed with the action and the validity or sufficiency of the stated causes of action, theories, and allegations. A successful motion to dismiss can narrow the basis on which the plaintiff may proceed and help your client obtain an early and favorable settlement.
While most litigators opt for a motion to dismiss, a judgment on the pleadings is another effective tool for disposing of claims. Similar to a motion to dismiss for failure to state a claim, a motion for judgment on the pleadings tests the legal sufficiency, substance, and form of pleadings and disposes of baseless claims or defenses. However, a motion for judgment on the pleadings can be filed only after pleadings are “closed”; that is, once a complaint and answers by all defendants have been filed. A motion for judgment on the pleadings should be considered in the following instances: the statute of limitations precludes recovery by plaintiffs; there is a statutory or court-ordered immunity from the application of a law; and there is a failure to state a claim.
Other tools include dispositive motions after discovery is conducted. A motion for summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The purpose of a summary judgment motion is to “pierce the boilerplate of the pleadings and assay the parties’ proof in order to determine whether trial is actually required.” A summary judgment also can be obtained on less than all the issues. This makes it a valuable tool for narrowing the opposing party’s claims that can proceed to trial.
The following considerations are important prior to using a pleading attack.
1. When Should You Challenge a Pleading?
You should decide at what stage of litigation to challenge a pleading. The main goal of a motion to dismiss and other early dispositive motions, such as a judgment on the pleadings, is to end the case quickly as a matter of law. The purpose of motions made later in the case, such as summary judgment motions, is to limit issues for trial or avoid trial altogether. While pleading attacks may end the case, courts liberally allow leave to amend the pleadings to correct deficiencies, particularly if it is early in the case. It may be beneficial to answer a defective pleading and move for judgment later, after initial discovery has been completed and the opposing party has further committed itself to a certain position, making it more difficult to cure the defect. However, if the pleading is verified, a required amendment may act as a preliminary discovery tool forcing the other party to make inconsistent or additional statements under oath in an amended pleading. Weigh these pros and cons prior to taking, or refraining from taking, action.
2. Will a Pleading Attack Cause Additional Delay or Expense?
Any additional work will consume time and money even if a pleading attack is successful. You should determine whether there is a right to an evidentiary hearing prior to a court making a decision. If the issue is contested, admissible evidence is required and discovery likely will be permitted. This becomes important when seeking the interim remedies discussed below. A party can, in some cases, delay the outcome of interim relief by claiming that an evidentiary hearing is required and that the party has the right to conduct discovery before relief can be granted. This results in more expense and delay for your client.
3. Should You Reveal Your Position?
Attacking a pleading may educate opposing counsel about your legal theories and/or the weaknesses or deficiencies in his or her case. If opposing counsel is educated, he or she can better plead and articulate the claims. Revealing your legal theories provides opposing counsel with an advantage because such knowledge enables him or her to better prepare for the argument.
4. What Is Your Chance of Success?
Evaluate realistically the likelihood of a favorable outcome. If a pleading attack is likely to be unsuccessful, the disclosure of legal theories, expense, and delay may outweigh the benefit of filing the motion. If odds are favorable, a pleading attack of meritless claims and defenses early in the litigation process will give your client an advantage from the start of the proceedings.
C. Method 3: Secure the Assets
Securing the assets and preventing property from disappearing is one of the most important things you should attempt early in the litigation process. This can be accomplished through a variety of strategies, descriptions of which follow.
1. Lis Pendens
You can record a lis pendens to protect real property during the course of litigation. A lis pendens is a common law and statutory doctrine that has the effect of providing constructive notice of an alleged claim or interest in a property. Lis pendens is an effective tool for protecting trust property because it essentially cuts off the claims of a bona fide purchaser by giving constructive notice of the pendency of the proceedings. The practical effect of the lis pendens is making it unlikely that the property can be sold or encumbered.
As a general rule, once the doctrine of lis pendens comes into operation, it remains in effect until the rendition of a final decision that puts a definite end to the litigation. However, many courts and legislatures have created standards by which lis pendens may be expunged or canceled, though these vary greatly by state. Some courts have deferred to legislative choice and stated generally that cancellation can be based only on specific statutory grounds, with some limiting statutory cancellation as appropriate only upon termination of suit. Other courts have extended cancellation to non-statutory grounds, based on the equitable powers of the court.2. Temporary Restraining Order
You can use a temporary restraining order (TRO) to protect liquid assets as well as real property. A TRO is designed to restrain the defendant from encumbering, liquidating, or transferring assets for a brief period pending a hearing on an application for a preliminary injunction. A TRO preserves the status quo until a determination is made on the preliminary injunction.Though state procedures vary, to obtain a TRO, most state requirements mimic the requirements of Federal Rule 65(b): A party must show that immediate and irreparable injury, loss, or damage is likely to result in the absence of the TRO. Specific facts are pled through an affidavit or verified complaint, and notice may be waived if the movant can certify efforts made to give notice and reasons why the TRO should not be required.TROs are generally issued ex parte, which refers to motions for orders that can be granted without waiting for a response from the opposing party. States vary in their use of ex parte proceedings, though most have it in one form or another.Some states also have restraining orders that are specific to elder abuse, which are useful when the safety or care of an elder is at issue.
Courts are split as to whether TROs may be appealed.3. Preliminary Injunction
A preliminary injunction also may be used to prevent a threatened wrong or injury to property rights until the issues and equities can be determined after a full examination and hearing. A preliminary injunction is not an independent cause of action but merely “preserves the status quo.” A preliminary injunction requires the showing of three elements: 1) the party seeking the injunction is likely to succeed on the merits; 2) the party seeking the injunction is likely to suffer irreparable harm in the absence of preliminary relief; and 3) the result is equitable when balancing harms and equities of the parties. The preliminary injunction is dissolved if evidence proving the injunction is unnecessary is obtained.
The party moving for a preliminary injunction or TRO is usually required to pay a bond. The amount of the bond is at the discretion of the court. A court may choose to dispense with the bond if there is no likelihood of harm to the enjoined party.4. Writ of Attachment
A writ of attachment may be used to freeze the defendant’s assets while a legal action is pending. Its general purpose is to secure a judgment and thus can be used only in limited circumstances. Procedures and requirements for relief vary by jurisdiction.5. Trustee Suspension and Removal
In many cases, it may be necessary to request immediate removal or interim suspension of a trustee at the commencement of litigation. The purpose of removing or suspending a trustee is to protect the trust assets from disappearing or dwindling by the trustee’s use of the assets to defend his or her claims. To know when removal is permitted, you must first determine the extent of the trustee’s duties. You can then decide whether the trustee’s breach justifies suspension or removal.
a. Trustee Duties
Because trustees have nearly complete control over a trust’s assets, their actions are governed by strict rules. Carefully consider each of the trustee’s duties and decide whether the trustee may be committing a breach of trust and, if so, how. Identifying potential breaches of trust is the first step to removing a trustee. Because the trustee has the ability to move assets out of the trust, removing a trustee can be an essential part of protecting trust assets during the course of litigation. The duties of a trustee are as follows:
• Duty of Good Faith. The trustee has a duty to administer the trust “in good faith.” Because good faith can be construed broadly, this duty includes “protecting trust property.”
• Duty of Loyalty. The trustee has a duty of loyalty to “administer the trust solely in the interest of the beneficiaries,” which prohibits the trustee from “engaging in transactions that involve self-dealing or that otherwise involve or create a conflict between the trustee’s fiduciary duties and personal interests.”
• Duty of Impartiality. If a trust has two or more beneficiaries, the trustee has a duty to act impartially in investing, managing, and distributing the trust property, in accordance with each beneficiary’s interests. This duty becomes particularly relevant in disputes involving multiple sibling beneficiaries and another sibling trustee.
• Duty of Prudence. The trustee has a duty to administer the trust as a prudent person would. This requires the trustee to exercise “reasonable care, skill, and caution.” The test of prudence is “one of conduct not of performance,” meaning that the trustee is to be judged on the basis of his or her action or decision at the time of the action or decision, not on the outcome. This duty also overlaps with most states’ adoption of a version of the “prudent investor” rule which requires a trustee to manage funds of the trust as a prudent investor would.
• Duty to Make Trust Property Productive. The trustee is under a duty to “use reasonable care and skill to make the trust property productive.” The trustee’s duty to administer the trust includes a duty to make reasonable efforts to obtain suitable investment returns from trust assets and provide other benefits consistent with the nature of the property and the terms and purposes of the trust.
• Duty to Inform and Report. A trustee “shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” This includes “promptly respond[ing] to a beneficiary’s request for information related to the administration of the trust.”
• Duty to Control and Protect Trust Property. A trustee “shall take reasonable steps to take control of and protect the trust property.” A trustee’s duty to preserve trust assets is in accord with the trustee’s fundamental duty of loyalty owed by every trustee to his or her beneficiary.
• Duty to Enforce and Defend Claims. A trustee “shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.” A trustee is authorized to “prosecute or defend an action, claim or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee’s duties.” A trustee is entitled to reimbursement for attorney’s fees and expenses incurred by the trustee in defending an action only if it is determined that the trustee did not breach the trust.b. Remedies for Breach of Trust
Various remedies are available if a trustee commits a breach of trust. You can consider compelling the trustee to perform his or her duties, enjoining the trustee from committing a breach of trust, and compelling the trustee to redress a breach of trust by monetary payment, property restoration, or other means. However, when a trustee has breached the trust and your client is particularly concerned about the trustee draining the trust of its assets, the best tactic is to attempt to suspend the trustee or remove the trustee completely.c. Removal of Trustee
The court will remove a trustee if he or she “has committed a sufficiently serious breach of trust or if it is probable that he will commit such a breach of trust or where for any other reason his continuance as trustee is likely to be detrimental to the interest of the beneficiary.” A trustee may be removed in accordance with the trust instrument, by the court on its own motion, or on petition of a settlor, co-trustee, or beneficiary under specified provisions.d. Interim Suspension of Trustee
In instances in which the court will not remove the trustee without an evidentiary hearing, you should consider seeking an interim suspension of the trustee’s right to exercise trust powers or suspending the trustee from acting at all pending the outcome of trustee removal. An interim special trustee can be appointed to marshal and protect trust assets. An interim suspension is not meant to punish the trustee but merely to maintain the status quo by allowing the trust to remain intact without any further damage to the assets. It allows for the suspension or limitation of one or more powers of the trustee, such as suspending or limiting the trustee’s ability to transfer assets. This power arises from the court’s equitable power.III. Attorney Fees for Defense: Conflicting Duties and Trustee Powers
A common problem in probate and trust litigation involves the use of trust assets to pay the defense’s attorney fees. The trustee accused of wrongdoing effectively forces the claimant to pay not only the claimant’s own attorney fees but also the fees of his or her opponent. One can argue that such a trustee should not use trust assets to defend his or her case and that the issue should be decided after judgment to determine whether there is an entitlement to fees at all.
You must evaluate the extent of a trustee’s duty to defend the trust and how that duty interacts with the duties of loyalty and impartiality owed to the claimant beneficiary. A trustee has a duty to defend against litigation to preserve trust assets. In doing so, “A trustee can properly incur and pay expenses that are reasonable in amount and appropriate to the purposes and circumstances of the trust and to the experience, skills, responsibilities, and other circumstances of the trustee.” As a general rule, trustees and executors are entitled to reimbursement for all expenses and attorney fees properly incurred in administering and defending the trust and the estate.However, such expenses must be necessary for the preservation of the trust. In other words, “[I]f the litigation is specifically for the benefit of the trustee, the trustee must bear his or her own costs incurred, and is not entitled to reimbursement from the trust.” Notably, “imposition of attorney fees upon trust estate should not depend upon the result of the litigation, but rather upon the reasonable necessity for it. … [A court] ought to consider not merely the result, but whether the trustees are acting reasonably and in good faith.” Still, trustees who successfully defend themselves against efforts to remove them are entitled to be reimbursed from the trust estate for the expenses of making their defense.The determination of reimbursement should be based on equitable considerations:
[W]hether a trustee should be awarded an attorney’s fee for defending a suit involving his administration of the trust depends upon equitable considerations, that each case must be decided upon its own facts, that the success or failure of the trustee in the litigation may be a matter to be considered but does not necessarily determine the trustee’s right to the fee, and that the trustee’s good faith and the reasonableness of his actions are matters to be considered … .Although the right to reimbursement is undisputed, the right to interim attorney fees is an undeveloped area of case law, and few courts have addressed the issue. You should become familiar with your state’s stance on the issue of interim fees and consider submitting a motion or petition to block the use of trust assets to pay such fees until resolution of the underlying litigation.IV. Challenging an Unfavorable Court Ruling
If the trial court’s ruling is unfavorable to your client, another litigation tool to consider is filing an appeal or writ to challenge the ruling. An appeal is a request for superior court review of a trial court’s final judgment, order, or decision. An appeal can be taken only if the lower court’s decision disposes of the merits of the case and leaves nothing for the court to do but execute the judgment (final decision).Interlocutory review, or interlocutory appeal, is a narrow exception to the long-standing rule that only final decisions are appealable. An interlocutory appeal is appropriate only in extraordinary cases in which early appellate review might avoid protracted and expensive litigation. As noted previously, courts are split as to whether preliminary injunctions and TROs fall under this exception and can be appealed.As a last resort, you can consider filing a writ. A writ is not intended to be a substitute for an appeal and is limited to exceptional circumstances. Writs are meant for situations in which there is no other legal recourse or the delay of waiting for an appeal will cause severe hardship.In some jurisdictions, an appeal or writ invokes an automatic stay as to the appealed and related issue. This is important to consider in the case of a denial of injunctive relief, a suspension/removal, or an interim fee issue. If the stay is automatic, it can be argued, for example, that trust assets cannot be used to pay fees absent a grant of relief from the stay and absent a showing sufficient to overcome an appeal stay. If you file an appeal and want the stay to become effective, the client in some jurisdictions is required to file an appeal bond to secure the appellee against loss and prevent frivolous and vexatious litigation.V. Discovery Essentials
A crucial part of any successful litigation is the proper use of discovery. Understanding the extent and scope of the right to conduct discovery will enable you to properly obtain the evidence needed to ensure a successful case. It is important to develop a discovery plan at the outset. You will need to obtain important records as you develop the record by deposing key witnesses. You also should conduct a pretrial investigation, including interviewing witnesses and retrieving documents to the extent possible. You should be aware of whether your state protects witness interviews as privileged attorney work products.The goal of discovery is to obtain key case records, including medical records, estate planning attorney files, financial records, insurance records, beneficiary designations, real property title history records, and entity records and agreements.
A. Discovery Tools
A variety of tools, which you should use to the extent possible, are available to make discovery requests to a party:
• Interrogatories. Interrogatories, formal written questions propounded to the opposing party, are helpful for obtaining written answers from the opposing party.
• Requests for Admission. Serving a party with a written request for admission requires the party to admit the truth of any matters within the scope of discovery. A request for admission is a useful tool because if the party fails to answer the request in a timely manner or otherwise fails to object to it, the requested matters are deemed admitted.
• Requests for Production of Documents, Electronically Stored Information, and Tangible Things. You may submit a request for the other party to produce writings, drawings, graphs, charts, photographs, sound recordings, images, other data or data compilations, and/or tangible things. The request must describe each item with “reasonable particularity.”
• Subpoenas. A subpoena may be used to obtain records, documents, and testimony from third parties. You can often obtain records from a nonparty (such as a medical provider) by notifying the records custodian and giving the nonparty the option of producing certified records.
• Depositions. A deposition is the examination of a deponent under oath by “oral questions.” You may generally depose “any person” as long as reasonable written notice is provided to both the deponent and opposing party. However, you must seek permission from the court to depose someone a second time or if that person’s deposition would result in more than 10 depositions being taken by the plaintiffs, defendants, or third-party defendants. A deponent’s attendance may be compelled by subpoena. A deposition is not only helpful for eliciting important information but also useful at trial for impeaching deponents who attempt to change their testimony.
Check your state’s discovery act and/or statutes for service, notice, and other requirements for each discovery tool.
Identification of key witnesses is also an important part of the discovery process. Key witnesses include the decedent’s treating physicians, care providers, drafting attorneys, relatives and close friends, and persons in regular contact with the decedent before and after amendments are disputed or assets are transferred. This is particularly important in determining to whom to direct subpoenas and deposition requests.
B. Expert Witnesses
Retaining expert witnesses is vitally important to litigating your case successfully. The first step is deciding which type of expert is needed. For example, if a decedent’s capacity is at issue, it would be prudent to hire a neuropsychologist who can examine medical records and testimony and decide whether the decedent had capacity. To address issues of undue influence or elder abuse, expert testimony in which an expert can speak to an individual’s susceptibility to manipulation can be used. In cases involving fraudulent documents, a handwriting expert may be required. Experts also may be required to testify on prudent investment, asset valuation, and other issues.
Experts can be hired for consulting purposes, testifying purposes, or both. Work product privilege protects the work of consulting experts. This privilege exists until the expert is designated as a witness. However, to the extent that reports by consulting experts embrace your impressions and conclusions, the work product doctrine gives absolute protection to that information. You should be cognizant of the distinction between consulting experts and testifying experts before designating expert witnesses.
You must identity your testifying expert witnesses to the opposing party as required by law. This disclosure generally includes a statement of opinion expressed by the witness and the basis for the opinion; the facts considered; exhibits that will be used to support the opinion; a list of the witness’s qualifications; a list of cases in which the witness has testified; and a statement of compensation to be paid for the witness’s study and testimony in a case.Experts should be obtained early in the litigation process because they can help guide you on the scope and type of evidence necessary for a successful case.
C. Obstacles to Discovery
You may be faced with obstacles to discovery that must be overcome. Obstacles to discovery include privacy rights, confidentiality rules, and privileges that prevent disclosure of specific types of information. In the context of trust, estate, and elder abuse litigation, the privileges that may arise include attorney-client privilege, doctor-patient privilege, clergy privilege, and confidentiality of medical and mental health provider records.
If privilege is invoked, you need to determine the holder of the privilege, whether the privilege even applies in the case, and, if it does, whether an exception might apply. Exceptions vary by state. For example, in California, a personal representative is the holder of the attorney-client privilege if the client is deceased and the office of the trustee, rather than an individual trustee, is the holder of the privilege for the trust.VI. Conclusion
Developing an effective strategy at the outset of litigation and using litigation tools available to you will increase the odds of your client obtaining a favorable resolution by way of settlement or judgment. Meritless claims can be defeated early in the process, and assets can be protected for distribution to the prevailing party consistent with the wishes of the decedent.