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1024px-Aliiolanihale Hawaii Supreme Cour

Attorneys Retained by Trustees Often don’t Realize their Primary Duty is to the Trust, not the Trustee.

It’s common for rogue trustees to use trust funds to retain attorneys for the purpose of stonewalling beneficiaries; They often hire the estate planning attorney who drafted the trust for the grantor/settlor; Since they are estate planners, not litigators, these attorneys are sometimes unaware their duty is to the trust itself, and not the trustee. This creates unnecessary litigation, because their trustee-clients are led to believe they can get away with abusing their powers.

Attorneys who help trustees breach their duties may expose themselves to liability. Under the Hawai’i Probate Rules (“HPR”) Rule 42 (c), an attorney representing an estate or trust, has an affirmative duty to assist the court in securing the effective management of the estate or trust, and to “ensure that required actions such as accountings . . . . are performed timely.” And “after prior notice to the fiduciary [e.g. trustee], [the attorney] shall have an obligation to bring to the attention of the court the nonfeasance [i.e. failure to perform a legally required duty] of the fiduciary.” HPR 42 (d), provides in pertinent part, “The court shall have the power and authority to impose sanctions upon any attorney who fails to properly carry out the attorney’s duties to the fiduciary, beneficiaries or ward, and the court.”

The Hawai’i Supreme Court held that an exception to the general rule, that an attorney is only liable to his client for negligence, is that non-clients may maintain a legal malpractice action based upon a third-party beneficiary claim, because they were intended beneficiaries of the contract between the trust’s attorney and the settlor. In Blair v. Ing, 95 Hawaii 247, 21 P.3d 452 (2001), beneficiaries of a trust brought a malpractice suit against the attorney and accountant who drafted the trust for their deceased parents. The pertinent issue was whether the beneficiaries had standing. The Hawai'i Supreme Court held that a trial court can confer standing upon trust beneficiaries as third-party beneficiaries to a contract by, (1) Determining whether recognition of the beneficiary's rights appropriately “’effectuate the intention of the parties . . .’”; and (2) Whether performance satisfies an obligation or “’give[s] the beneficiary the benefit of the promised performance.’” See Blair, Id at 256, 461 (internal citations omitted).  Note that attorney-client agreements and trusts are both contracts, potentially conveying standing to third-party beneficiaries; see e.g. Estate of Bodger, 130 Cal. App. 2d 416, 424, 279 P.2d 61, 67 (1955).

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