Payment of Attorney’s Fees From Trust Assets In Virginia

Introduction

     A common dispute that arises in trust administration involves whether attorney’s fees and related litigation costs should be paid from the trust’s assets or another source, such as the decedent’s estate. In Bradshaw v. Estate of Thomas Owens Watson, the Court of Appeals of Virginia affirmed that such costs, when incurred to properly administer or terminate the trust, can indeed be paid from the trust itself - even over a beneficiary’s objection.

Background

     In Bradshaw, the petitioner, a trust beneficiary acting pro se, appealed a circuit court order that awarded attorney’s fees and guardian ad litem fees from the proceeds of a terminated trust. Bradshaw argued that the trust’s creation under the decedent’s will barred these payments from the trust corpus and instead required them to be drawn from the decedent’s residuary estate. The Court disagreed. Key Arguments and the Court’s Response Bradshaw raised three principal arguments: (1) that the final order conflicted with the court’s oral pronouncement at the hearing, (2) that the terms of the will prohibited using trust funds to pay administrative costs, and (3) that the fees awarded were unreasonable. The Court of Appeals rejected eachclaim.

     (1) On the first point, the court found Bradshaw’s reliance on criminal case law inapplicable
          to this civil matter. In civil proceedings, a written final order governs, even if the oral
          pronouncement varies.
     (2) Regarding the trust provisions, Bradshaw cited Article I of the will, which directed that
          administration expenses be paid from the residuary estate. However, the Court held this
          provision referred only to estate administration, not the trust created under Article III.
          The will’s language simply did not extend this direction to trust termination expenses.
     (3) Bradshaw also claimed the trust was a spendthrift trust and that trust funds should be
          shielded from administrative costs. The Court clarified that while the trust included
          spendthrift protections for shielding beneficiaries from creditor claims, this did not
          preclude legitimate administrative costs incurred by the trustee.

Authority to Pay Fees from the Trust

     Critically, the will granted the trustee powers consistent with what is now codified in Virginia Code § 64.2-105(12), which expressly allows trustees to employ and compensate attorneys and other professionals using trust principal or income. The Court emphasized that this statutory authority supported the trustee’s actions and validated the fee payments from the trust corpus.

     This case reinforces that attorney’s fees and administrative costs associated with trust management or termination may lawfully be paid from trust assets, particularly where the trust instrument or incorporated statutory powers permit it. Beneficiaries should be aware that spendthrift clauses do not override a trustee’s statutory duty to ensure proper trust administration.

Smith Strong Can Help

     If you are involved in a trust administration dispute or have questions about the fiduciary powers granted under a trust, Smith Strong, PLC is here to assist. Please call one of our offices at (804) 325-1245 (Richmond) or (757) 941-4298 (Williamsburg) to schedule a consultation with one of our experienced estate and fiduciary litigation attorneys.