Since California trustees generally can use trust funds to pay lawyers to handle disputes, litigation can drain away the funds available for distribution to beneficiaries.  Hence, an overaggressive beneficiary can pursue litigation that penalizes all beneficiaries, even those who have no responsibility for the fight.

Last week the California Third District Court of Appeal, based in Sacramento, clarified the scope of liability for litigants who act in bad faith in trust disputes.  In Pizarro v. Reynoso (2017) 10 Cal.App.5th 172, the Court of Appeal ruled that a probate court’s equitable authority to charge the trustee’s legal expenses against a party who has litigated in bad faith is limited to the party’s share of the trust estate and does not extend to the party’s personal assets.