Is It Possible to Challenge a Trust?

After a Last Will and Testament, a trust agreement is among the most used estate planning documents. Trusts are included in an estate plan for a wide variety of reasons, including to help an estate avoid probate. Whether you are thinking about creating a trust, are responsible for administering a trust, or are the beneficiary of a trust, you may wonder if it is possible to contest a trust. The Coral Gables trust attorneys at Stivers Law explain when and how you can challenge a trust.

Trust Basics

A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. A trust is created by a Settlor who transfers property to a Trustee appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries.  All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime.  Living trusts can be further subdivided into revocable and irrevocable living trusts.

Contesting a Trust

You are likely familiar with the concept of a Will contest wherein someone (usually a beneficiary or heir) challenges the validity of a decedent’s Will that has been submitted for probate. A Will contest can be costly – both in terms of time and money. The desire to avoid both probate and litigation is one of many reasons people often choose to rely predominantly on a trust to distribute their estate. Can that trust be contested though? The answer is “yes,” a trust can be contested; however, it is typically a more complicated process than contesting a Will.

Contesting a trust works essentially the same as contesting a Will. As with a Will contest, you cannot challenge a trust simply because you are not happy with the terms of the trust agreement. In other words, being left out of a trust is not a valid legal reason to challenge the trust. Instead, you must use one of the legal reasons allowable under state law which governs most issues related to wills, trusts, and estates. For example, you could challenge the Settlor’s capacity to create the trust. In this setting, capacity refers to the mental state necessary to establish the trust. You might also contest a trust by claiming that the Settlor was subject to “undue influence” at the time the trust agreement was executed. Improper execution and/or technical flaws with the trust agreement itself can also serve as the basis for a challenge to a trust.

To contest a trust, you will also have to have “standing.” Standing is the legal term used to refer to someone who has the legal right to initiate a legal proceeding. In the case of a Will or trust contest, a person must usually be a beneficiary, heir, previous beneficiary, or sometimes a creditor to have the standing required to proceed. If you have standing and you believe you have a valid legal reason to contest a trust, a trust contest can be initiated by filing the necessary legal documents with the appropriate court.

What Is a No Contest Clause?

To discourage challenges to a trust, a Settlor may include a “no contest” clause in the trust agreement. A “no contest” clause effectively states that if a beneficiary unsuccessfully challenges a trust (or Will) they forfeit the inheritance designated for them in the trust. Of course, the trust must dictate that some assets are to be distributed to the individual for a no-contest clause to work as intended. For example, imagine that your estate is worth $5 million, and you are concerned that a child might challenge your trust. To discourage that challenge you could include a provision that gifts $100,000 to your child and add a no-contest clause.  Your child forfeits that $100,000 if he/she contests the trust unsuccessfully. Because state laws govern the enforceability of no-contest clauses, be sure to check with your trust attorney to determine if adding one to your trust is a good idea.

Contact Coral Gables Trust Attorneys

For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about contesting a trust, contact the experienced Coral Gables trust attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.