Although a Last Will and Testament remains the cornerstone of any comprehensive estate plan, people are choosing to include one or more trusts to their plan with increasing frequency these days as well. Not surprisingly, this leads to more litigation in the area of trusts as well. Because people often know very little about trust law we are often asked “ Can a trust be contested?”
A trust is a separate legal entity that is created by someone who is referred to as the grantor. The grantor must then appoint a trustee who is charged with administering and overseeing the trust as well as designate one or more of beneficiary who will receive the benefits of the trust. The grantor also needs to create trust terms that will dictate how the trust operates as well as transfer assets into the trust to fund the trust. What happens, however, if a beneficiary wants to contest the trust? The simple answer is that a trust can be contested; however, it is typically a bit more complicated than contesting a Will.
A true trust contest must allege that the trust itself is not valid. To invalidate the creation of a trust you must usually prove that the grantor was subject to duress, fraud, or undue influence at the time of the trust’s creation. Alternatively, you may be able to contest a trust on the basis that a required formality in the creation of the trust is missing. Though this type of trust contest is possible, most people are more interested in modifying or terminating a trust then in truly contesting a trust.
Trusts are governed by state law, meaning that the laws can differ somewhat from one state to another. The Uniform Trust Code, however, does provide an overall framework for trusts throughout the United States. Under the UTC, a beneficiary of a trust is allowed to petition a court to modify or terminate a trust agreement under very limited circumstances. A beneficiary might, for instance, request a court to terminated trust when the amount of assets held by the trust is so small that the continuation of the trust makes no sense. Likewise, if the purpose of the trust becomes impossible or impractical, a court may agree to modify or terminate the trust entirely.
Because state laws vary and each trust is unique it is important that you consult with an estate planning attorney if you have specific questions about contesting a trust.
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