Trusts can be invaluable to the estate planning process, providing a smooth and effective way to transfer your assets to designated heirs and beneficiaries. One of the great advantages of a trust is that it can generally allow you to avoid the probate process altogether, sparing your heirs from a lengthy and potentially costly court process. Simply having a will does not allow you to sidestep probate, which is why most estate planning lawyers advise having a trust in place, too.
With that said, trusts can sometimes invite their own legal complications. Specifically, the terms or provisions in a trust can be contested in court. A trust may be contested by any named heir or beneficiary, or by family members who feel like they were erroneously omitted from the trust.
While there is no way to fully prevent a contested trust, there are some simple steps you can take to minimize the risk of your own trust being challenged in court. One of the most important steps of all is learning more about the most common reasons why trusts wind up in court.
Common Reasons Why Trusts are Challenged in Court
There are several grounds on which a trust may be challenged, often requiring the intervention of a trust litigation attorney. Some of the most common reasons for a contested trust include:
Trustee Mismanagement
Any time you establish a trust, it’s mandatory that you name someone as your trustee. This is a legally appointed representative whose job is to manage and administer the property that’s contained in your trust, always acting in the best interests of the trust maker (or grantor) and the named heirs and beneficiaries.
It goes without saying that, when you name someone as your trustee, you should desire someone who is competent, ethical, honest, and responsible. When a trustee falls short of their fiduciary duties, however, that provides grounds for the trust to be contested in court.
So, what would trustee mismanagement look like, exactly? Some of the most common forms of trustee mismanagement include:
- Misusing funds
- Neglecting to make the required distributions
- Self-dealing
- Failing to properly communicate with heirs and beneficiaries
If an heir or beneficiary feels like their assets have been compromised due to neglectful or malicious actions on the trustee’s behalf, it may require intervention in court.
Undue Influence
Another common reason why trusts are challenged in court is undue influence. Undue influence is a legal term that denotes someone in a position of trust or authority, misusing their position to obtain assets illicitly.
Consider this example: An older woman has been diagnosed with dementia. Her children all live quite far away, but she has a boyfriend who stops by to take care of her every day. In theory, the boyfriend could use his proximity to the woman to convince her to change the terms of her trust, writing out her children while ascribing more assets to him.
This would be a textbook example of undue influence, and certainly grounds to consider a legal challenge to the trust.
Lack of Clarity
A trust may also be challenged if it is written in a way that is ambiguous or unclear.
What does it mean for the language of a trust to be ambiguous? The law defines ambiguity as any situation in which two different people could read the same language, and reasonably arrive at two different conclusions about what it means.
Ambiguity often leads to trusts being contested in court, which makes it essential to enlist an estate planning attorney who can draft your documents with precision and care.
Disputes Among Beneficiaries
One of the primary benefits of a trust is that it allows you to clearly articulate how you wish your assets and properties to be distributed among your heirs and beneficiaries. Even when you provide this clarity, however, disputes can arise between your surviving loved ones. These disputes often occur when people feel like they did not get their “fair share,” or in some cases when people didn’t get anything at all.
These disputes can often be prevented by communicating your intentions with all of your family members, taking time to talk about estate planning before the day comes when the trust is actually administered. Even so, if one heir feels like they were “cut out” due to an instance of manipulation or undue influence, they may choose to bring a legal challenge to your trust.
Questions About Mental Clarity
A trust may also be contested if there is a concern about the grantor’s mental acuity.
For example, if an heir or beneficiary alleges that the grantor wrote or revised their trust while being affected by dementia or Alzheimer’s, it can lead to a legal challenge. Indeed, this is one of the most common grounds on which trusts wind up in court.
To successfully challenge a trust on the basis of the grantor’s mental capacity, it requires substantial evidence, including testimony from reputable physicians. Even so, these challenges do sometimes result in substantial changes to how a trust is executed.
Improper Formation of the Trust
Finally, trusts can be challenged in court if there is reason to believe they were improperly formed. For example, your trust can be contested if it lacks a key component, such as a named grantor, qualified trustee, designated beneficiaries, properly transferred assets, etc.
As such, it’s imperative to work with an experienced estate planning lawyer any time you draft a trust, ensuring you get all the elements and documentation in place. A professional using estate planning software can be trusted as they are in a better place to deliver differentiated advice according to your needs and goals
Responding to Trust Disputes
While there are a number of steps you can take to reduce the risk of your trust being challenged, even the most carefully drafted trust may wind up contested in a courtroom. If this happens, it is best to work with a skilled trust litigation attorney. A good lawyer may be able to have the challenge dismissed or resolved via an amicable mediation process. In the most extreme scenarios, your attorney will be able to provide guidance through the entire litigation process, ensuring the most favorable resolution possible.
Disclaimer:
Max Alavi APC, OC Trusts Lawyer, contributed this blog post as an educational resource. The material is meant for informational purposes only and not to provide legal advice because laws and regulations may differ across states, and each case may be unique. If you have any questions about the content of this post, it is recommended that you seek advice from a local Estate and Probate attorney.