Common Disputes That Can Spark Trust Litigation

Fri Sep 29, 2023 | Trusts |

Trusts are a common estate planning tool that presents a number of advantages over wills and the probate process. However, there is a somewhat common misconception that trusts are immune to disputes and litigation. This is unfortunately not the case. However, understanding some of the issues that can lead to litigation can help you avoid it. A trust litigation attorney can also help you manage these disputes to avoid litigation or provide representation if the dispute cannot be resolved. 

Disputes Challenging the Validity of the Trust Itself

Many disputes that result in trust litigation arise from questions involving the validity of the trust itself. These disputes are typically seeking to have the trust set aside so that assets can be distributed pursuant to some other process. These disputes are often motivated by beneficiaries or heirs who are unhappy with their inheritance or have been treated unfairly under the trust. For example, a child from a prior marriage may be unhappy that they are receiving less than the heirs from a subsequent marriage and is therefore trying to have the trust declared invalid. 

Disputes challenging the validity of the trust can broken into two types: 

  1. Issues regarding the drafting of the trust. These disputes can involve arguments over things like whether the settlor (the person who created the trust) was of sound mind at the time the trust was created or whether the trust was the product of undue influence. In this situation, the trust is valid on its face, but there are issues beneath the surface that would support having it set aside.   
  2. Issues regarding the execution of the trust. Under Florida law, trusts are subject to the same requirements as wills when it comes to their execution. For example, the trust must be signed by the settlor and must be signed by two witnesses, all of whom must sign the trust in the presence of each other. If the trust does not meet the legal requirements for execution, a court could declare the trust to be invalid and set it aside.  

These same concerns can apply to amendments, revocations, and subsequent trusts. Whether you are a trustee, a beneficiary, or a potential heir, disputes that call the validity of the will into question can be very difficult to resolve. Filing a lawsuit and going to court may be the only option for getting it resolved. If you are involved in a trust dispute, a trust litigation attorney can explain your options and if necessary, provide litigation representation. 

Fiduciary Duty Disputes

When a trust is created, someone is named as trustee – the person responsible for managing and administering the trust according to the terms and objectives of the trust agreement. Serving as trustee is an important role with significant responsibilities, chief among which is the legal obligation to act in the best interest of the other parties to the trust at all times. Meanwhile, trustees have broad authority and discretion to manage complex assets. The trustee can make decisions concerning investing, selling, and distributing trust assets that are binding upon the trust so long as they act in the best interests of the beneficiaries. 

Disputes can arise over how the trustee performs their duties in administering the trust. These disputes can be summarized in two ways: 

  1. Disputes claiming that the trustee has been negligent in performing discharging their responsibilities as trustee. This is where the beneficiaries accuse the trustee of failing to take due care in administering the trust. These claims can be difficult to prove given the broad discretion that trustees have, but a trust litigation attorney will know whether you can present a claim. 
  2. Disputes involving allegations that the trustee has committed some kind of malfeasance. These cases involve allegations that the trustee has done something illegal, unlawful, or unethical in performing their duties. 

Disputes alleging a breach of the trustee’s fiduciary duty are very complex and generally require the involvement of a trust litigation attorney to get them resolved. 

Examples of Disputes Involving a Breach of Fiduciary Duty

To illustrate what fiduciary duty disputes may look like, a few examples may be helpful: 

  • The trustee fails to monitor the trust’s investment portfolios, one of which loses significant value because it is overinvested in a particular company’s stock that is insolvent.
  • The trustee manages a commercial retail building that is held by the trust. Over the years, the trustee has neglected routine maintenance and upkeep. This leads to a loss of tenants and a precipitous decrease in rental income. 
  • The trustee commingles trust assets with their personal assets and the assets of other trusts they manage. 
  • The trustee fails to provide timely accountings to the beneficiaries. 
  • The trustee embezzles funds from the trust for their own personal use. 
  • The trustee engages other professionals in the management of the trustee for their own personal benefit. 

These are some of the more obvious examples of common disputes involving the trustee’s fiduciary duty. If you suspect that the trustee has breached their fiduciary duty or you are a trustee who has been accused of acting in violation of your fiduciary duty, a knowledgeable trust litigation attorney can help you understand your options. 

How a Trust Litigation Attorney Can Help

Whether you are the one who has instigated the dispute or a beleaguered trustee, the first step in any dispute is to investigate the facts. An experienced trust litigation attorney can use their knowledge of the law to identify those facts that are relevant to the dispute, whether there is a valid claim, and what you can do to resolve the dispute without going to court. They can work with you to develop an effective strategy and work on your behalf with the other parties to the trust to get it resolved. If resolution outside of court is not possible, they can then provide aggressive litigation representation. 

Involved in a Trust Dispute? Contact Ellis Law Group Today

At Ellis Law Group, we help our clients put whatever disputes they are facing behind them. To discuss your case, contact us today by calling 561-910-7500 to discuss your options and how we can help.