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When setting up an estate plan, you might be advised to have a living trust to ease the transfer of assets. A living trust, also called a revocable living trust, is a legal instrument for holding an individual's assets. With a living trust, the grantor has the authority to change and revoke the terms of the trust at any time. However, you might wonder if a living trust can be contested.
Can a Living Trust be Contested?
Yes, you can contest a living trust, but it involves filing in probate court. Contesting a living trust is a decision that can be made for various reasons. Some of the most frequently encountered situations where the terms of a living trust are contested are:
- Some trust beneficiaries may be unsatisfied with the terms of the trust.
- Individuals left out of the living trust may believe they should have been included.
- Some may have concerns about how the trustee is managing the trust assets.
What are the Grounds for a Living Trust to be Contested?
For a living trust to be contested, it typically poses greater challenges compared to contesting a will. There are many reasons why an heir might contest a living trust, including:
The Grantor Lacks Capacity
When it is believed the grantor was not of sound mind when creating a trust, then it can be contested. The grantor's mental capacity at the time of establishing the trust can significantly impact its validity and enforceability.
For a living trust to be contested on these grounds, there must be a thorough investigation. Sufficient evidence must support this belief, ensuring that rightful measures are taken to protect the interests of all parties involved.
Undue Influence on the Grantor
Someone may claim there was undue pressure or influence in creating a trust. While such allegations can be significant, they require substantial evidence to substantiate. They would need to investigate the circumstances around the creation of the trust.
This includes gathering any relevant documentation or testimonies to support or refute these claims. Only through a rigorous evaluation can an accurate determination be made regarding the validity of such assertions.
Fraud or Duress during the Creation of the Trust
A revocable living trust can be contested if allegations arise regarding creating a trust under fraudulent circumstances or duress. These allegations can have serious implications on whether or not the trust is valid. In this instance, persons making this claim might allege signatures or documents were forged.
Errors in Execution
When it comes to creating and signing a living trust, mistakes are not to be taken lightly. This is why you need to work with estate planning professionals who are meticulous. Suppose errors or inaccuracies are present in the process. In that case, it opens up the possibility for the trust to be contested on those very grounds.
Ensuring that every step involved in establishing the trust is executed properly and by legal requirements is imperative. Failure to do so can have significant consequences and jeopardize the validity and enforceability of the trust.
Improper Administration of Trust Assets
When a trustee fails to fulfill their obligations, beneficiaries have the right to take legal action. Trustees are legally bound to act in the best interests of the beneficiaries and manage the trust according to its terms. In some cases a grantor might neglect their duties or breach their fiduciary responsibilities. Under these circumstances, beneficiaries can pursue legal remedies to protect their rights and ensure proper trust management.
What Does It Take to Contest a Living Trust?
To successfully contest a trust, there must be legal standing. This means they are directly affected by the execution of the trust. Therefore, those who may have the ability to contest a trust include:
- Trust beneficiaries
- The grantor's heirs who were not included in the trust
- A successor trustee
Having legal standing alone does not give anyone the authority to contest a living trust. For an heir to contest a living trust, there must be valid grounds to support claims with evidence to prove it. Simply being dissatisfied with how assets are distributed, beneficiaries are chosen, or trustees are appointed is insufficient.
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If someone wants to contest a living trust, the burden of proof will fall on them. Living trusts may contain a "no-contest" clause, which can penalize beneficiaries who try to contest the living trust. This could result in them losing their inheritance.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
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