Trust litigation covers many different topics which may arise during the course of administering a Trust. If litigation becomes necessary or occurs in a Trust, you should seek appropriate representation with an attorney who has litigation experience, in addition to experience with the Trust itself. Below are some of the more common occurring areas of Trust litigation.
• Was the Trust presented to the beneficiaries in fact the most recent Trust executed by the Grantor?
• Did the Grantor execute the Trust freely and willingly with no undue constraints or influences?
• Was the Grantor of sound mind when executing the Trust?
• Was the Grantor suffering from dementia, senility, or under the influence of medication or alcohol?
• Does the Trust contain the plan and/or design of the Grantor?
• Was the Grantor unduly influenced to write the Trust a certain way (i.e. did a child force the Grantor to give them more in the Trust or to leave out another beneficiary?)
Breach of Fiduciary Duty by the Trustee
• Failed to perform statutory duties or other directives as set forth in the Trust (i.e. failed to preserve the assets, pay bills correctly, disperse assets or pay interest or other assets out to the beneficiaries as set forth in the Trust).
• Selling assets in the Trust for less than fair market value.
• Purchasing assets that are inflated or unreasonably priced, or are worthless and do not serve the purpose of the Trust.
• Giving assets in the Trust to individuals who are not designated to receive those items.
• Disposing of assets as worthless without verifying appropriately.
• Keeping a beneficiary from receiving an item or distribution due to bias toward the beneficiary (i.e. giving the item or asset away or selling it to someone else and failing to pay the value received to the beneficiary).
• Stealing or embezzling money, securities or other assets from the Trust, or converting assets of the Trust for personal use of the Trustee, or paying the Trustee’s personal bills with trust funds.
• Failing to verify if an asset should be part of the Trust.
• Taking a higher Trustee fee than provided for in the Trust.
• Selling assets from the estate in exchange for personal gain.
What did the Grantor mean to say in the Trust?
• Do all the beneficiaries understand what the Grantor meant when describing an asset or giving directions as to when and how they were to receive their distribution or assets from the Trust? If not, it may be necessary to have the Court interpret or decide what the Grantor meant or intended in their Trust. This problem tends to occur in self-prepared/online documents, which are prepared by the grantor themselves. In this situation, the Court would hold a hearing with testimony from all interested parties and render a decision. To prevent this issue, you should consult with a qualified attorney and have a properly prepared Trust created to avoid unclear or confusing wording/terminology.
Who is a Beneficiary?
• If it is unclear who your beneficiaries are in a Trust (due to poor drafting or unclear wording), this can lead to the necessity of having the Court determine who you intended to be the beneficiaries of your Trust and what they are to receive in the form of assets, distributions, money, etc.
Beneficiary left out of the Trust
• You may have executed your Trust prior to a marriage, birth of a child or children, have gone through a divorce, or perhaps a death of a spouse or child, but never updated your Trust after these life changing events. This can lead to a situation where a spouse may be evicted or removed from the house where they have lived and end up on the street or without a place to live. It may result in a child or children being left out and the assets of your Trust going to someone that you did not intend or want to have assets in the Trust, resulting in the possible impoverishment of your spouse or children.
By having your Trust properly prepared by a qualified attorney who practices in the area of Estate Planning, and choosing your Trustees wisely, you can avoid these mistakes and issues that can arise.