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It is a common misconception that the costs of all parties in probate proceedings are deducted from the estate. However, it depends on your role in proceedings.
If a person acts in the role of personal representative of an estate and adopts a neutral stance in proceedings, their costs will normally be paid out of the estate. Neutral in this instance means they do not seek to take the side of existing beneficiaries in a claim.
It should be noted that the courts have the ability to vary the position and a judge may use their discretion to make an entirely different order. For example, if they consider that misconduct has taken place, an application has been made to remove a personal representative or the personal representatives have participated in third-party litigation unsuccessfully without previously obtaining directions from the court to do so.
Beneficiaries and Third Parties
The starting point for beneficiaries or other third parties who are involved in probate proceedings is that the loser pays the winner’s costs, but again a court has a wide discretion to vary the position where they consider it is appropriate. A judge will consider the conduct of the parties throughout proceedings, whether a party has been successful in part of their case, and whether any offers of settlement have been made during the course of proceedings.
Types of Order
An indication of some of the orders that a judge may consider in relation to costs throughout the course of proceedings are set out below:
- Costs in any event - regardless of the overall outcome of proceedings, the party who was successful in a particular part of proceedings (commonly an interim application) will receive their costs incurred relating to that part of the litigation.
- Costs in the case - no decision is made regarding the costs in an interim hearing. Instead, the position is reserved until the final hearing and costs for that hearing will then be awarded in favour of who the judge orders costs for at the final hearing.
- Costs reserved - the court postpones a decision on costs until a later hearing.
- No order as to costs - each party bears their own costs as to the part of proceedings being determined, regardless of any order in favour of a party at a final hearing.
- As such, whilst a judge has discretion to order costs be paid out of an estate in a probate action, it is important to consider your role as a party to the litigation and whether a judge might consider an alternative interim or final Order as to costs.
Inheritance Act Claims
In a dispute under the Inheritance Act a successful claimant is likely to have their costs awarded from the estate. An unsuccessful claimant will not.
As above, where personal representatives of an estate adopt a neutral stance their costs will normally be paid from the estate but a judge has the same discretion set out above in relation to other probate claims to deviate from this position.
Protection for Personal Representatives and Trustees on Costs
Where there is a possible need to bring or defend litigation on behalf of an estate or trust and there is a dispute between beneficiaries as to the appropriate action to take, if the personal representatives or trustees bring or defend litigation and are unsuccessful, they may be held personally liable for the costs of the litigation.
Personal representatives and trustees can protect themselves against being found personally liable for costs incurred in such instances by making an application to court for a Beddoe Order. This is a request to a court that the personal representatives or trustees be indemnified out of the estate or trust for any costs they incur, in the event that they lose.
Whilst it is essential to make such a request at an early stage in proceedings, if a judge considers that a Beddoe Order has been requested unnecessarily, they can make an order that the costs of the application be a personal liability of the personal representatives or trustees.
Potential Costs Orders in Trusts Disputes
Sometimes it is possible to obtain an order for funding out of the assets of a trust or estate prior to litigation commencing. This is on the basis that the operation of the trust or estate is unable to continue without resolution of the issue. An example would be where trustees were unable to identify the group of beneficiaries for whom they should hold funds in the trust, in which case, the beneficiaries’ costs of bringing a claim might be considered as appropriate to be paid from the trust to allow a resolution of the issue.