A contest over the validity of a trust or a trust amendment is an expensive undertaking, typically requiring extensive discovery and a lengthy trial. Can a trustee use the trust’s assets as a war chest to fight off the contestant, even when the trustee is a beneficiary of the challenged trust document and thus has a vested interest in its validation? Or must the trust assets be kept in a lockbox for the benefit of the winner of the contest? This has been a murky topic in California trust litigation for many years because some trusts contain terms purporting to authorize the trustee’s defense, but no appellate court had addressed the enforceability of such language in a published opinion.
In an article recently published in California Trusts and Estates Quarterly, I discuss the California Court of Appeal’s decision in Doolittle v. Exchange Bank (2015) 241 Cal.App.4th 529. This case, contrary to its name, does much to clarify when trustees can tap trust funds to defend contests. If the trust contains certain language authorizing the defense, the trustee may use the assets as a litigation war chest, unless and until the probate judge otherwise orders, and subject to downstream review for reasonableness. California estate planners should take note because the insertion of a single sentence into a trust document may be pivotal in the dynamics of a future trust contest.