Key Takeaways
- During trust administration, disputes may arise over the validity of the trust document or the terms contained within it if beneficiaries believe it does not accurately reflect the creator’s wishes.
- A trust contest is a lawsuit filed in the courts of appropriate jurisdiction to challenge the validity of a trust.
- Avoid trust contests by appointing a qualified trustee, clearly communicating with beneficiaries, diligently documenting the grantor’s intentions, and more.
- If disputes among family members do arise, you should contact a skilled trust litigation attorney as soon as possible for guidance on the ideal next steps.
Introduction
Trust contests and related disputes can derail the trust administration process, delaying distributions to beneficiaries and potentially putting the fulfillment of the grantor’s wishes at risk. Even worse, conflicts during trust administration can affect family dynamics and cause harmful rifts in relationships for years to come.
For your trust to work as intended, it is crucial to avoid future trust contests and disputes amongst heirs and beneficiaries. Fortunately, there are many steps that a trust creator and its trustee can take during the creation and administration of a trust to minimize the risk of disputes and legal contests. This guide offers several tips to help you avoid future trust contests, reduce the risk of disputes among family members, and protect the interests of the individual who established the trust.
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Understanding Trust Contests and Disputes
A trust contest is a type of lawsuit filed with the probate court to dispute the validity of a trust being used to guide the distribution of its creator’s assets. A successful contest can result in the award of money damages, the removal of a trustee, or the invalidating of all or part of a trust instrument. Only interested parties, meaning those with a financial interest in the trust or its assets, can contest a trust if they have grounds to do so.
Legal grounds for trust contests include:
- Improper execution – If a trust was not signed or executed in accordance with the requirements of state law, or if the trust instrument fails to include one or more necessary terms, the trust can be contested as not being legally valid.
- Mental Incapacity – Trust creators must understand the nature and consequences of their decisions to create a valid trust instrument, and a trust contest may invalidate the trust because of the settlor’s mental state.
- Undue influence – Undue influence occurs when a vulnerable individual is coerced or wrongfully pressured into creating or changing their trust instrument, and it is grounds for considering a trust invalid.
- Fraud – If a trust instrument appears to have been created under fraud, duress, or forgery, interested parties may contest the document.
Importantly, these types of trust contests seek to invalidate the trust itself. You may have legal options if another type of trust dispute arises, such as claims for breach of fiduciary duty. For example, a beneficiary may have a claim to remove a trustee who is failing to provide the beneficiary with trust information, or a beneficiary may petition a court to compel an accounting from the trustee.
Tips To Avoid Trust Contests and Disputes
To avoid trust disputes and legal contests, you should eliminate as many grounds for contests as you possibly can by ensuring that the trust is carefully created and administered.
Establishing a Clear and Precise Trust
Ambiguous or unclear terms in the trust instrument may lead to disputes over the trust, as interested parties may contest the document to dispute whether it truly reflects the grantor’s true intentions and what those intentions really were. Creating your trust with clear beneficiaries, a thorough list of assets, and specified distribution terms can eliminate question marks and ambiguities in the administration of your trust.
Establishing your trust in collaboration with an attorney and financial advisors is beneficial for ensuring that you include all necessary components and clearly communicate your wishes and interests. Consider having a trust administration attorney review your trust for support in identifying potential holes that could lead to disputes in the future.
Accompanying the Trust with a Valid Will
Trust settlors often create a will at the same time as their trust. A will can function as an additional tool for demonstrating a grantor’s intentions. Pairing the trust with a valid will can solidify the settlor’s intent and bolster the trust against potential contests. If both documents appear to align in their goals, the resulting estate plan will be more consistent and less vulnerable to future challenges.
Many trust settlors intend to avoid the probate process following their passing, with the trust playing the most important role. To be safe, however, the trust creator should still create a will. The will and trust may go hand-in-hand for protecting one’s wishes. For example, a will can be used to establish a testamentary trust contained within the will itself, along with rules about how that trust will be funded. Meanwhile, an option like a pour-over will allows for any assets to be transferred into a preexisting trust, preventing specific assets from being left in limbo. Even the most careful planners sometimes forget about a particular asset. The will functions as a backstop to catch any stray assets omitted from the trust.
You should consult an estate planning attorney for more guidance regarding how a will and trust may go together and how a combination of tools may make the most sense for your estate plan.
Effective Communication with Beneficiaries
Beneficiaries should not have a direct hand in the estate planning process, given that their participation may give the appearance of influencing the grantor’s decisions. That said, the grantor should inform his or her beneficiaries about the grantor’s intentions and the reasons behind them. By communicating with beneficiaries during and after the creation of the trust, the grantor can clearly inform beneficiaries of their intentions so that they are less likely to be surprised by trust distributions and more prepared to meet the challenge of a contesting party.
If beneficiaries are completely aware of the grantor’s intentions, they are less likely to raise disputes in the future. If you are hesitant to have this conversation with beneficiaries directly, consider having an attorney available to guide the conversation. Having this conversation early can be particularly beneficial for preventing disputes in the future.
Documenting Intentions Separately
As seen above, trust grantors who wish to avoid contests should establish their intentions by creating a consistent estate plan and disclosing those intentions to their beneficiaries. In a potential trust contest, however, the grantors’ intended beneficiaries will need all the help they can get. Grantors may wish to create a written statement separate from the trust, will, and other estate planning documents. In trust contests, the grantor’s intent is often highly disputed. Grantors can set up their intended beneficiaries for success by leaving written documentation that specifically explains their intentions. This document does not have to be intended to be a court document; instead, it may be as simple as a written letter. This letter should be printed, signed, and dated, rather than kept in a changeable format like a Word document.
Additional documentation serves as a valuable reference point in case of disputes regarding the trust document’s content. If your family members see your own words in writing, they have less of a case to dispute the trust on the grounds that it was influenced by anyone other than you and your true intentions.
Incorporating a No-Contest Clause
A no-contest clause can deter beneficiaries and interested parties from contesting a trust, thereby minimizing the risk of unnecessary or disruptive litigation. A no-contest clause often discourages contests by stipulating that if an individual is unsuccessful in contesting the trust, they may be disinherited from the trust.
However, no-contest clauses may not always be enforceable. Disinheritance is often unlikely as long as the beneficiary has legal grounds to contest the trust. Still, it’s important to consult a trust litigation attorney in your jurisdiction to understand the implications of such a contest and whether it is beneficial for you to consider in the administration of your family’s trust.
Requiring Timely Objections to Accountings
Trustees are required to provide an accounting of trust assets according to state law and the terms of the trust. States or trust instruments may require accountings annually, upon request by beneficiaries, or whenever a trust changes trustees. The beneficiaries may then have an opportunity to challenge the accounting in court. According to California probate law, for example, beneficiaries have up to three years to file a trust accounting objection.
However, a trustor may set terms within the trust instrument to reduce the amount of time beneficiaries have to contest an accounting as long as the accounting is accurate and complete. Setting terms for how long interested parties have to object to an accounting can minimize the risk of drawn-out legal contests while still providing an opportunity to hold the trustee accountable for their responsibilities.
Authorizing Trustee’s Use of Trust Funds for Legal Defense
Many trustees may use trust funds to defend the trust’s interests against legal contests. By authorizing the trustee to use these funds, the grantor can reduce the risk of disputes and deter legal contests by allowing the trustee to spend trust money to hire an attorney, pay legal fees, and defend against claims. With the ability to use trust funds to defend against legal contests, the trustee has the means to fight for the grantor’s intentions.Interested parties may be less willing to file legal claims if they will be met with well-funded pushback by the trustee, especially if the trustee’s legal funds are depleting the beneficiary’s inheritance.
Selecting a Competent Trustee
Many trust disputes arise when a trustee fails to carry out their duties responsibly or uphold their fiduciary duty to act in the best interests of the trust. Although many people consider selecting a family member or close friend as trustee, appointing a competent and experienced trustee is crucial for ensuring that the trust is administered properly and the terms are clearly followed. Responsible administration of the trust is paramount to avoiding many potential conflicts and preventing legal disputes.
For example, common trust disputes involving trustees include a trustee neglecting to follow the terms of the trust or acting with misconduct in their management of the trust, such as self-dealing. A trustee who is aware of their responsibilities and takes their fiduciary duty to the trust seriously is more likely to avoid such acts of misconduct and negligence that could lead to disputes.
A competent trustee will also be prepared to act quickly in case disputes arise, and early intervention can often shorten the length and intensity of a dispute. The trustee should engage legal help when necessary to reduce the risks of lengthy disputes. Depending on the complexity of your estate, you may consider selecting a professional trustee or trust company.
Regularly Updating Your Estate Plan
After initially creating your trust, it’s crucial that you update the plan regularly to ensure that it continues to align with your wishes. Many experts advise reviewing and updating your estate plan at least every three years. Changes in life events or unforeseen circumstances also justify reviewing and updating your estate plan. For example, life events such as getting married, getting divorced, receiving your own inheritance, or having a child should all warrant reviewing your estate plan. Consult an estate planning attorney to assist you in updating your trust under the appropriate legal processes.
Addressing All Assets Adequately
Include all of your assets in your estate plan and ensure that you have an adequate plan for how they should be managed and distributed. If assets are not included in your estate plan, then there is a higher likelihood of disputes surrounding how to address this property. With all assets included in the trust, accounted for, and having appointed beneficiaries, the fate of this property will be clear.
The use of a pour-over will can be beneficial for ensuring all assets are included in the trust upon the death of the grantor to avoid assets from being unintentionally excluded from the trust or the general estate plan.
Strategies for Preventing Undue Influence
Undue influence can be a common and significant factor that renders a trust invalid. If a vulnerable individual was inappropriately influenced into adjusting their trust or estate plan, then any affected portions of the trust instrument may be considered invalid.
Some options for preventing undue influence or minimizing the risk of related disputes include:
- Receiving medical letters of capacity, reports, or other documentation of a recent exam, which can demonstrate an individual’s mental fitness and resistance to influence at the time of creating a trust.
- Engaging in psychological examinations, which can be used to either demonstrate sound mind and mental fitness or provide caution that an individual is vulnerable to undue influence.
- Ensuring that the initial trust instrument and any changes that occur after are executed in writing and signed before witnesses who can speak to the grantor’s mental competence and preferably the grantor’s intentions.
The execution of the initial trust instrument and any changes that occur after should be witnessed, so the grantor’s intended beneficiaries will have additional proof of the grantor’s competency. Importantly, the witnesses should not include the grantor’s beneficiaries, given that their presence may imply undue influence. The support of multiple witnesses and evidence, like medical records, can help to quickly address disputes that surround factors like undue influence and mental capacity.
Importance of Timely Mediation
If you cannot fully avoid trust contests or disputes, you will want those disputes to be addressed quickly and efficiently. Mediation is an opportunity for all parties involved in a dispute to come together and share their perspectives and goals in pursuit of a mutually agreeable solution.
Mediation is a less invasive and welcome alternative dispute resolution compared to litigation, as it is typically less costly, less time-consuming, and less contentious. Mediation often creates a friendlier environment for dispute resolution than the tension and stress of litigation. An early mediation may be impossible, however, if an information gap prevents the contesting parties from knowing the contents of the trust.
Consult a skilled trust litigation attorney as soon as you have reason to believe there may be a trust dispute. Early intervention can prevent breaches of fiduciary duty and strategic missteps.
Consulting Trusted Legal Counsel
Trusted legal counsel is a valuable resource for supporting you throughout trust administration and into litigation if disputes occur. An experienced trust administration attorney can provide crucial guidance during the administration of the trust to prevent disputes, helping you navigate the legal steps of the process and ensuring that you are in compliance with both the terms of the trust and state laws.
Having trusted legal counsel can help you build an effective strategy for developing a case and protecting the interests of your trust. Trust litigation attorneys can provide support on all sides of an issue, including in defense of the trust as well as in pursuing a trust contest to ensure that the true wishes of the grantor are honored.
Navigate (and Avoid) Trust Disputes With RMO Lawyers
Trust disputes can create significant delays in the trust administration process and risk putting the wishes of the grantor and the interests of the beneficiaries in jeopardy. By taking proactive steps during estate planning and during the trust administration process, you can minimize the risk of trust contests and carefully navigate them.
If you have questions or concerns about managing a trust, the trust administration attorneys at RMO can assist you in navigating the process. If a dispute does occur, our team of experienced trust litigation attorneys may be able to help you navigate it. By taking the time to understand your case and the unique family dynamics surrounding it, we will work to develop a winning strategy to quickly, efficiently, and effectively resolve your dispute.
Schedule a consultation with our attorneys to discuss your case and how to proceed.
Frequently Asked Questions
Trust disputes often arise from lack of clarity in the trust document, such as ambiguous terms, incomplete beneficiary lists, or conflicting instructions. Other major causes include undue influence, where someone pressures the grantor to change trust terms, and claims of incapacity or fraud in the creation of the trust. Disagreements over trustee decisions—such as investments, distributions, or accounting—also frequently spark conflicts. In blended families or complex estates, disputes over interpretation or perceived fairness are especially common.
Preventing trust disputes begins with thorough, clear drafting: use precise language, define terms, and anticipate future scenarios. Communicating openly with heirs and beneficiaries about your intentions and reasons can help reduce misunderstanding or suspicion. Regularly updating the trust to reflect changes in family or financial circumstances also helps avoid surprises. You might also include a no-contest clause, mediation or arbitration provisions, and periodic accountings to enhance transparency and deter challenges.
When a trust dispute occurs, resolving it without full litigation is ideal. Many parties opt first for mediation or arbitration, which are less adversarial and quicker than a court trial. If those fail, formal litigation may be necessary; in that scenario, your attorney can seek motions to dismiss, summary judgment, or negotiate a settlement before trial. Throughout the process, focusing on evidence, preserving documents, and maintaining a clear narrative of the grantor’s intent are key to success.
Glossary
Trust Contest – A legal challenge to the validity of a trust, typically initiated by interested parties who dispute the terms, execution, or authenticity of the document.
Trust Litigation – The process of resolving disputes through the court system, often involving wills, trusts, or estate management.
Grantor – An individual who transfers their assets into a trust to be passed down to their children or future generations.
Settlor – Another word for “grantor,” a “settlor” is someone who creates a trust.
Trust – A legal agreement that grants a third party, or fiduciary, the authority to hold and manage assets for the beneficiaries of an estate.
Trustee – A person appointed by a trust’s creator to coordinate the administration of the trust, manage the trust’s assets and distribute the assets to the trust’s beneficiaries.
Beneficiary – A beneficiary is any individual in line to inherit assets like money or property from a deceased individual. A beneficiary can be determined by state law or named in a will or trust document.