Trustee Liability

When naming spouses, children or other loved ones to serve as trustees in your testamentary (after death) trust or trust shares, consider a recent case where an estate trustee who took an “egregious” position in litigation has been ordered to personally pay more than $140,000 in costs.

Lawyers say the costs decision in Craven v. Osidacz is part of a growing body of case law that says executors need to be cautious in how they conduct themselves in litigation, and, if they are not, they’ll be ordered to pay costs personally. Before someone takes on the role of an estate executor, personal representative or trustee, the party should know that they may have exposure to significant personal liability rather than assuming that their costs are all going to get paid out of the estate.

Historically, in estate dispute matters, courts order costs to be paid from the estate, but they have been shifting away from this in recent years whenever executors have engaged in unreasonable conduct during litigation. The case I refer to above concerns a claim for damages by Julie Craven after her estranged spouse, Andrew Osidacz, stabbed their son to death and threatened to kill her before he was shot to death by police in 2006.

The deceased husband’s brother, Michael Osidacz, became the executor of his estate. Craven brought a wrongful death suit against the estate as well as a claim for damages, as her deceased spouse physically assaulted her before they separated. The litigation dragged on for a decade, ultimately ending in May with a $565,000 judgment in Craven’s favor.

The Superior Court Justice found that Osidacz acted to carry out a vendetta against Craven to limit the compensation she would get from the estate and that he submitted “virtually no evidence” in the estate’s defense. “His actions went far beyond ‘misguided litigation’ and amounted to harassment of another party,” the decision read.

Craven sought more than $156,000 in legal costs.

The Judge ordered the estate trustee to pay costs personally on an elevated basis, as his conduct was “foregoing, reckless and egregious.” Osidacz will also be required to pay his own costs in addition to an order to repay the estate legal costs.  The decision serves as a stern warning for estate trustees to make sure they seek direction from the court and look to resolve matters at a very early stage.

This case is a good example of how litigation can become expensive, and it is therefore important for lawyers and the fiduciaries acting for an estate to consider putting evidence before the court in a non-contentious manner, because, if they’re unsuccessful, costs might be awarded personally against the estate trustee. To that end, many courts order the parties to engage in mediation in an effort to resolve disputes without trial.

While the extreme facts of this case don’t necessarily make it precedent for all matters where an executor/trustee unsuccessfully challenges a claim, it does offer a cautionary warning. I should note that this case originated out of Ontario, Canada and is not from the United States. Nevertheless, the warning is clear:  unreasonable conduct on the part of an executor/trustee may lead to personal liability.

Most estate trustees go into litigation thinking that they’re going to get all their costs paid out of the estate and it’s not going to cost them anything. As this case demonstrates, that’s not always the case.

This is a broad warning not only to those who take on the office of executor or trustee, but also speaks to the choices that one makes when naming their successor trustee. I have written a new book Selecting Your Trustee that delves deeper into these issues. I’ve found that many clients don’t fully understand the responsibilities associated with serving, and therefore don’t always make good decisions. This book provides guidance. For more information contact my office.

The Sheppard Law Firm has its main in Fort Myers and also in Naples by appointment.

© 2017 Craig R. Hersch. Originally published in the Sanibel Island Sun.

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Craig R. Hersch

  • Senior Partner,
    • Sheppard Law Firm
  • Florida Bar Board Certified Estate Planning Attorney / CPA
  • Editorial Advisory Board Member,
    • Trusts & Estates Magazine
  • Founder & Board Member,
    • State Chartered Trust Company