Sacramento | Elk Grove Trust Contests Attorneys
Trust Contest Lawyers in California
Contesting a Trust and Litigation
What Is a Trust Contest?
Trust contests fall into two main categories: contests that challenge the terms of a trust, and contests that challenge the administration of a trust. These two types of legal actions are fundamentally different in the grounds on which each action may be brought, the elements which must be argued and proven, and the legal ramifications of the action.
Only certain specified parties have the standing – or right footing – to challenge a trust. These parties include beneficiaries, former beneficiaries under prior versions of the trust, and trustees.
Contesting the Terms of a Trust
A trust “contest” involves an attempt by a beneficiary – or a would-be beneficiary – to revise the terms of the trust based on one of the following grounds:
- Lack of due execution
- Lack of capacity
- Fraud or undue influence
- Disqualification of a beneficiary
Most often, trust contests are brought on the basis that the primary trust beneficiary or beneficiaries exercised “undue influence” over a vulnerable parent in order to get a larger share of an inheritance. Whether such claims will be successful depends on the unique facts and circumstances of each case. While a parent has every legal right to leave his or her estate to any beneficiary he or she chooses, if the gift was not made voluntarily, a court is likely to revoke it.
If you believe that the terms of a trust are the result of fraud, duress, menace, or undue influence, or that the settlor lacked mental capacity to create a trust at the time the trust was drafted, contact us to schedule a free consultation. We will objectively evaluate the facts and circumstances of your case and will give you an honest assessment about your chances of success in a legal action.
Contesting the Administration of a Trust
The most common action to contest the administration of a trust is an action against the trustee for breach of fiduciary duty. A trustee has a fiduciary duty to the trust and to the trust beneficiaries. The trustee must marshal trust assets, evaluate creditors’ claims against the trust, properly account for the trust, and distribute the trust assets to the beneficiaries according to the terms of the trust. These duties are governed by Probate Code section 16000 et seq. Any violation of a trustee’s duty is a breach of trust, for which the trustee may be subject to legal penalties.
In contrast to an estate administrator, who is under the supervision of the court, the trustee of a trust is not automatically subject to legal oversight. This is a critical distinction between the process of administering an estate and administering a trust. The absence of court oversight can result in a trustee failing to follow proper trust administration procedures.
Beneficiaries’ Right to Information
Beneficiaries of a trust have a right to a copy of the trust documents, information regarding the administration of the trust, and an accounting of the trust assets. Where a beneficiary suspects that the trustee is failing to properly administer the trust, the first step is to request information from the trustee.
Many trusts are designed to split into two or more sub-trusts upon certain events taking place, such as the death of the settlor. Where a husband and wife jointly create a trust, they may set it up such that it splits into two trusts upon the death of the first spouse, then changes again upon the death of the surviving spouse. Where a trust is supposed to be split into sub-trusts, the trust assets must be allocated properly between the two trusts.
Each trust contains different allocation requirements, and often a trustee will completely forget to allocate trust assets or will inadvertently do so in violation of the trust terms. Where a surviving spouse is the trustee, he or she often doesn’t see the need to carefully follow the terms of the trust, and then when the surviving spouse dies the successor trustee has to clean up the mess and attempt to follow the terms of the trust for the benefit of the beneficiaries.
A bad-acting trustee can put valuable assets into one sub-trust and less-valuable assets into the other sub-trust, thereby creating a situation in which one group of beneficiaries profit more than another group. Because the allocation – even if done retroactively – is done according to date-of-death asset values, it is possible for a trustee to use hindsight to put assets that have increased in value over time (such as real property or investments) into one trust, and leave bank accounts and other static assets in the other trust.
Trustees are entitled to reasonable fees for their administration of a trust. Fees may be set forth in the trust document, or the trustee may take a reasonable fee of 1% of the total trust assets, paid annually. Trustees can use trust funds to defend their actions as trustee in subsequent litigation, provided although a trustee may not be reimbursed for fees if they are removed for breach of trust.
Will a No Contest Clause Eliminate My Inheritance if I Contest the Trust?
Many beneficiaries are afraid to bring an action to compel a trustee to fulfill his or her obligation to account for trust assets and expenses because they are under a mistaken belief that such an action would constitute a “contest”, possibly invoking a “no contest” clause in the trust and eliminating that beneficiary’s inheritance. This is a common misconception. In fact, if a trustee is not fulfilling his or her fiduciary obligation to the trust and to the trust’s beneficiaries, the beneficiaries are well within their legal rights to bring an action to compel the trustee’s performance, or to remove the trustee. This type of action will not invoke a “no contest” clause, because it is not an action that challenges the terms of the trust – to the contrary – it is an action that seeks to compel proper compliance with the terms of the trust.
If you are a beneficiary of a trust and suspect that the trustee is self-dealing or is not administering the trust properly, we can assist you in holding the trustee accountable to the terms of the trust and to their fiduciary duties. Similarly, if you are a trustee of a trust and are facing a trust challenge, we can help.