A trust litigation attorney plays a role in helping beneficiaries receive what they are entitled to and providing trustees the defense they may need against frivolous lawsuits.
Trusts are rarely cut and dry, but trustee interference or poor conduct can make an already opaque and difficult situation far harder.
The last thing you want to do after losing a loved one is get into a messy fight with someone they loved or trusted – but sometimes, things work out in a way no one wants them to.
Trust litigation involves challenging a beneficiary or a trustee’s conduct towards you or the trust and finding the best possible resolution.
Trust litigation can help you secure the information you need and are entitled to, whether it’s the financial history and information behind the trust, a copy of the trust document itself, the trust’s asset list, or the principal of the trust. Trust litigation also involves defending yourself from fruitless accusations and unreasonable demands.
Do you always need trust litigation? Thankfully, no. Most trusts are set up, managed, and dissolved without great issue, and are headlined by trustees who are dedicated to fulfilling the financial legacy of the grantor, and serving the interests of the beneficiaries. Most administrators, executors, trustees, and co-trustees work hard to complete the tasks they are given and live up to the expectations of the grantor and their family.
But there are times when trustees aren’t as trustworthy as we might have hoped they would be, or times where the relationship between a trustee and the beneficiaries is more than strained.
Whether you’re an accuser or the accused, it is crucial in times like this to seek professional legal counsel. We will take you through the basics of what it means to launch into trust litigation – and who you might want to stand by your side.
Trust Basics and Fiduciary Duty
Trusts are a legal entity defined and characterized by their respective trust documents, and an asset list. They are an estate planning concept that holds assets, properties, and accounts “in trust” between three parties: the grantor, the trustee, and the beneficiary.
Trusts can be described to do many things. Their primary benefit over the will, which essentially tells an executor who gets what after the author’s death, is their flexibility.
Trusts can be written to withhold assets for years after the grantor’s passing, managing them to grow in value and pay dividends to the beneficiaries until they reach a certain age, or until they meet certain milestones.
They can be designed to provide a lasting and comfortable passive income to special needs adults and disabled loved ones. They can be written to provide income to your children, then distribute the remainder to charity. Things only get more complicated as the number of grantors, trustees, and beneficiaries increase in any given case.
Where wills are testamentary and go into effect after death, trusts begin to serve their purpose the moment they are conceived and notarized, even while the grantor is still alive.
These include blind trusts, which manage investments for a grantor without letting them know how these assets and accounts are being invested to eliminate a potential conflict of interest, to irrevocable trusts, which allow grantors to reduce the size of their taxable estate and protect certain assets from creditor claims, at the cost of losing most ownership rights over said assets.
Given their complexity, a lot can go wrong when setting up and managing a trust over the years. There can be miscommunication between grantors, trustees, and beneficiaries. Messages can get lost, meaning gets muddled, intentions are blurred. As such, there is a guiding principle behind every trust: the fiduciary duty of the trustee to the grantor and the beneficiary.
What this means is that the trustee has a legal responsibility to manage the trust in the best interests of the grantor and the beneficiaries. This means not gambling away the contents of the trust, but making conservative investments, and avoiding speculation. This means not paying less than market value for the assets within the trust in the interest of liquidating them for the beneficiaries. More concretely, trustees must:
- Carry out the grantor’s instructions.
- Pay off the debts the trust may owe.
- Invest assets responsibly, if permitted to invest.
- Make appropriate decisions about the distribution of assets if the grantor’s wishes are unclear.
- Keep a strict record of all administrative actions.
Trustees carry the most weight in the relationship because they are granted great powers over the trust by the grantor, for the explicit sake of the beneficiaries. In return, trustees are typically well compensated, which is one of the reasons trusts are expensive to maintain and manage over long periods.
Reasons for Trust Litigation
When things turn sour, a trust can become the central point of a lawsuit of its own. Trust litigation usually occurs when:
- There is doubt as to the legitimacy of the trust.
- The trustee has proven themselves incompetent or is incapacitated but is refusing to step down.
- There are massive misinterpretations on the intent behind the trust.
- The trust’s funds are being used inappropriately by the trustee.
Trusts are ironically one of the best ways to protect your assets from litigation, alongside other claims against your person and your belongings. They allow you to separate your assets from yourself, put them in the management of someone you trust, and for the benefit of someone else. That someone else can be you again. But in the case of estate planning, it is usually more productive to name your loved ones as beneficiaries to a trust.
Why Work with a Trust Litigation Attorney?
Finding the right trust litigation attorney is crucial when navigating the world of trust litigation. The last thing you want is to be caught unprepared when accused of misappropriating funds, frivolous claims, or of manipulating the wishes of a grantor.
Both trustees and beneficiaries need very good reasons and very strong evidence to argue their respective cases, and one way or the other, trust litigation is destructive to the relationships between trustees and beneficiaries. Yet it’s undoubtedly necessary in cases where there is evidence of fraud – or when you need to defend against idle claims.