Hidden in Plain Sight: Avoiding Conflicts of Interest in Trust Litigation

Can a trustee use trust money to pay for legal fees in a court case about whether they did something wrong as a trustee? Before 2008, they needed court permission, but now they just have to tell the beneficiaries and the beneficiaries can ask the court to stop the trustee from using the money. If the person in charge of a trust (Thomas) improperly uses trust money to pay a lawyer (Laura), and the beneficiaries (like Benjamin) prove that there was wrongdoing, the court can order Thomas to pay back the money to the trust. It’s unclear from the law who has to pay back the money, which creates a problem for lawyers who represent people in charge of trusts. Laura may have a conflict in representing Thomas because she wants him, not her, to refund the legal fees. She can’t ethically argue that he should pay because it goes against her duty to him as a lawyer. In our situation, the lawyer representing Thomas should not argue that he should personally pay the legal fees, as it would be a conflict of interest. The Florida Supreme Court has not been lenient with lawyers who put their own interests ahead of their clients’. This conflict is similar to conflicts that arise under other rules, such as Federal Rule of Civil Procedure 11 and Florida Statute 57.105, which allow for sanctions to be imposed on attorneys or parties who file improper pleadings or motions. These rules recognize the potential for conflict and aim to avoid it. When a lawyer represents a client in a trust dispute, there can be a conflict of interest if the client may have to pay back legal fees. There are no clear solutions in the current law, but the lawyer can try to solve the problem by asking the client to agree to pay for any fees out of their own money, or by including a provision in the trust document allowing the trustee to use trust money to defend against a lawsuit. The lawyer can also ask the client to agree to take responsibility for any fees that may need to be refunded later. If the client agrees, then there is no conflict of interest. It’s important for lawyers to communicate openly with their trustee clients to avoid conflicts of interest. If a trustee fee is disputed, it could lead to serious problems if not addressed early on. This is a common issue that lawyers need to be aware of and handle carefully. A lawyer may have a conflict of interest if they need to argue that their client should not be punished, but not themselves. There is a law that says the terms of a trust are more important than the trust code. There is a proposed change to the law that may help in some cases, but it doesn’t solve the main problem. A lawyer and an associate from a law firm wrote this article to help other lawyers.

Source: https://www.floridabar.org/the-florida-bar-journal/hidden-in-plain-sight-avoiding-conflicts-of-interest-in-trust-litigation/