The Professional Trustee’s Guide to Estate Contests and Disputes

What Are the Most Common Estate Contests and Disputes?

Estate contests and disputes occur when an interested party challenges the validity of a will in probate court. A will is invalid if the testator did not follow state legal requirements, if the testator was not of sound mind, or if a third party illegally manipulated the testator and used undue influence to obtain a document that did reflect the testator’s intent.

 

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Legal Requirements Not Followed 

Testators must follow the specific rules and formalities established by state law when creating a will. These laws vary between states, but every state requires the following:

  • The testator is of legal age.
  • The testator meant for the document to be their will. (“testamentary intent”)
  • The testator signed the will.
  • At least two witnesses signed the will.

If the will fails to meet any one of these requirements, the probate court is likely to deem the document an invalid will. 

Lack of Testamentary Capacity

For a will to be valid, the testator must be of “sound mind” when creating the will. Sound mind means that the testator must have the mental capacity to understand three essential concepts:

  • That they are creating a will
  • The nature of their estate assets
  • Who will inherit their property

It’s a pretty low standard.  The only standard that’s lower is the standard to marry.  Under this standard, a person may have dementia and still form a valid will, as long as they understand these three ideas when executing the will.

Undue Influence or Fraud

Undue influence occurs when a family member, close friend, trusted advisor, health care worker, or any third person compels or coerces the testator to execute a will or trust in their favor. The influence exerted must be extreme and put the testator under a severe level of duress that causes them to abandon their free will and give in to the third party’s desires. 

Similarly, a will can be fraudulent if a third party tricked the testator into signing the will by claiming it was another document, the third party forges the testator’s signature, or the third party otherwise creates a document through fraudulent means that the testator did not intend to be a will.

Can a Trustee Be Sued?

Trustees have a legal duty to administer the trust for the beneficiaries’ benefit while acting with skill, care, and caution.  In reality, serving as trustee is a thankless task, because the fiduciary duty owed to beneficiaries – the highest duty – allows beneficiaries to sue trustees for perceived errors or mismanagement of a trust.  

Common issues that beneficiaries complain about that could expose trustees to personal liability include:

  • Trustee theft of trust assets
  • Failing to distribute trust assets
  • Failing to provide an accounting or transparency about trust management
  • Mishandling trust assets
  • Poor investment choices
  • Self-dealing
  • Conflicts of interest
  • Favoring or disfavoring one beneficiary over another
  • Paying taxes late or occurring avoidable penalties and charges

To protect themselves from personal liability, trustees should always keep detailed and well-organized records. They should thoroughly document every transaction, their time, and detail their reasons for making their decisions. Trustees should also make sure they understand all of the trust instructions and obey them strictly.

Can a Beneficiary Be Sued?

Unlike trustees, beneficiaries do not have any responsibilities in administering a trust or estate. A beneficiary simply receives what the trustee gives them. Since a beneficiary does not have a fiduciary duty to the trustee, trustees rarely have reason to sue a beneficiary unless the beneficiary has stolen or otherwise damaged trust property. For this reason, it is much more common for a beneficiary to sue a trustee.

Can a Beneficiary Be Removed?

Beneficiaries can only be removed under certain circumstances. Beneficiaries may choose to disclaim or waive their interests and remove themselves as beneficiaries. However, a trustee cannot change a beneficiary designation unless the trust document contains language that expressly allows the trustee to disinherit a beneficiary – commonly found in a power of appointment – or contains other language that serves to disinherit a beneficiary upon the occurrence of some event – most often allowing a trustee to suspend or terminate benefits to a beneficiary with substance abuse issues.

How Should I Handle a Problem Beneficiary?

It’s an unfortunate truth that some, perhaps even many, beneficiaries can be difficult and demanding. In our experience, this type of behavior often stems from fear and anxiety about a lack of transparency in the trust administration process. Beneficiaries may not be familiar with how trusts work or may resent that the trustee has been put in charge of the trust property. 

Even when a trustee is doing everything right, if the beneficiaries don’t know what the trustee is doing or why they are doing it, they might be uncooperative. Here are a few suggestions for trustees on handling a problem beneficiary:

  • Reach out to all beneficiaries early in the process.
  • Make sure the beneficiaries understand your role.
  • Help the beneficiaries form realistic expectations for how long it will take to administer the trust.
  • Keep beneficiaries informed about how you are managing trust assets.
  • Treat questions as opportunities for engagement.
  • Don’t hide trust documents, assets or other information from beneficiaries.
  • Be as transparent and communicative as possible throughout the administration process.

Following these rules can help keep beneficiaries happy, and happy beneficiaries are far less likely to cause trouble.  What’s more, courts are far less likely to take issue with your trust administration if you’ve kept beneficiaries well-informed.

What Is an Estate Litigation Attorney?

An estate litigation attorney specializes in addressing, managing and resolving trust and estate disputes, including securing protections from probate court if necessary. These litigation proceedings may include a variety of matters, such as:

  • Petitions for court instructions
  • Petitions to recover stolen assets 
  • Will contests
  • Undue influence
  • Financial elder abuse
  • Fraudulent conveyances
  • Testamentary capacity and intent
  • Breaches of fiduciary duties by trustees and other fiduciaries
  • Accountings
  • Trust modification and reformation

Estate litigation attorneys can help people on both sides of these proceedings. For example, an estate litigation lawyer can represent a beneficiary suing a trustee for a breach of fiduciary duty, or they can defend a trustee against such a claim.

What Should I Prepare Before Contacting an Estate Litigation Attorney?

Before contacting an estate litigation attorney, you should prepare by gathering relevant documentation and other evidence. Depending on the facts of your case, you may want to collect any of the following:

  • Will or trust documents
  • Death certificates
  • Preliminary list of the assets and their estimated values
  • Inventory of trust assets and investments
  • Deeds to real property
  • Life insurance policies
  • Documents related to applications for public benefits such as Medicaid or Social Security
  • Gift tax returns and estate tax returns

If you don’t know what documents are relevant, you should schedule a free consultation with an estate litigation attorney to discuss the situation.

When Should I Contact an Estate Attorney?

Professional trustees should contact an estate attorney upon appointment to help administer the trust, especially if it is the first time they have served as a trustee. A trust administration lawyer can help ensure that the private or professional trustee understands and follows the relevant laws governing trusts and trustees. If you’ve recently become a trustee, you should schedule an initial consultation with an estate attorney as soon as you can. 

Retaining an attorney when you are first appointed can help you avoid a lawsuit in the first place. If you’re a trustee who is already being sued by a beneficiary, you’ll be best-served to contact an experienced estate litigation attorney to represent you rather than trying to engage opposing counsel on your own. 

Have questions?
The consultation is always free.

(424) 320-9444 or hello@rmolawyers.com

 

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About RMO, LLP

RMO LLP is an estate litigation firm serving clients in Los Angeles, Santa Monica, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.