Can a Trust’s Lawyer Receive Distributions of Trust Assets?
A LAWYER’S FEES CAN BE PAID FROM TRUST ASSETS
A lawyer who is acting on behalf of a trust in a professional capacity (i.e., as the trustee or as legal counsel to a trust) can be paid from trust assets. The funds in the trust’s bank or other accounts can be used to pay the lawyer’s fees–both trustee fees and professional fees for serving as legal counsel–assuming, of course, that the fees are properly billed and payable, under the law. (While this should be obvious, if a lawyer is not entitled to fees, due to ethical violations or otherwise, trust assets cannot be used to make wrongful payments.)
As we will see in a different post, issues may arise where the same lawyer serves as both the trustee of a trust and legal counsel to that same trust, although even in this situation, the lawyer’s fees can be paid from trust assets if proper consent or permission is obtained.
Generally speaking, the trustee can pay the trust’s lawyer directly from trust accounts; the trustee customarily does not pay the trust’s lawyer from his or her separate funds.
LAWYERS CANNOT RECEIVE ‘DONATIVE’ DISTRIBUTIONS OF TRUST ASSETS
However, lawyers who draft a trust are barred from receiving “donative” transfers or distributions from the trust. In other words, the lawyer who drafts or amends a trust agreement is not allowed to name himself or herself as a beneficiary of that trust (with certain exceptions, provided by law).
In an effort to prevent lawyers from circumventing this rule, the following people also are barred from being named as beneficiaries (or receiving donative transfers) from a trust:
- The law firm, and any lawyers who work at or for (or own interests in) the law firm, of the lawyer who drafts a trust
- The employees of the lawyer who drafts a trust
- The relatives (by blood or marriage) of the lawyer who drafts a trust
- The domestic partners and spouses of the lawyer who drafts a trust
- Anyone who shares a house or other living space with the lawyer who drafts a trust (in legal terms, the lawyer’s “cohabitants”)
This rule exists to prevent the settlor of a trust being subject to undue or improper influence at the time the trust (or an amendment to the trust) is drafted. A similar rule exists with regard to caretakers, for similar reasons. The law attempts to protect the settlors of trusts (many of whom are aging) from being influenced inappropriately by legal counsel (or others in positions of power or trust).
If you believe a lawyer acted inappropriately, or may have exercised inappropriate influence, over the settlor of a trust–whether or not that settlor is you–contact an experienced lawyer immediately for an evaluation of your rights and potential legal claims.
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Disclaimer: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE AUTHOR OR ROSS LAW AND ANY PERSON. Your legal rights and experiences may vary. Never use an online article (including this one) to evaluate your legal rights or claims. Consult an experienced attorney promptly to obtain a personalized evaluation of your claims, potential damages, and the various legal rights and options available to you.
You may lose or compromise your rights if you delay in consulting legal counsel. Most legal claims (and defenses), as well as legal and court procedures, are complicated and fact-dependent. If you believe you have a claim against someone who injured you, a lawyer who represented you in a previous lawsuit, or any other legal claim, consult an experienced lawyer immediately for an evaluation of your individual rights and claims.
