Trusts are estate-planning tools that can replace or supplement wills, as well as help manage property during life. A trust manages the distribution of a person's property by transferring its benefits and obligations to different people. There are many reasons to create a trust, making this property distribution technique a popular choice for many people.
To create a trust, the property owner (called the "trustor," "grantor," or "settlor") transfers legal ownership to a person or institution (called the "trustee") to manage that property for the benefit of another person or persons (called the "beneficiary"). Trusts create a "fiduciary" relationship running from the trustee to the beneficiary, meaning that the trustee must act solely in the best interests of the beneficiary(ies) when dealing with the trust property. If a trustee does not live up to this duty, then the trustee is legally accountable to the beneficiary for any damage to his or her interests. The grantor may act as the trustee himself or herself, and retain ownership. A grantor may also name himself or herself as one of the beneficiaries of the trust. In any trust arrangement, however, the trust cannot become effective until the grantor transfers title to the property to the trust. Generally, the Trustee must submit an annual accounting for review of their activity.
Some of the issues which may cause Trust disputes to arise are:
- Interpretation of terms and clauses in the trust document
- Fiduciary issues, including breach of fiduciary duty, whether the trustee engaged in self-dealing, invested the assets prudently, made a proper effort to save administrative costs and taxes, followed the instructions in the trust instrument, charged excessive fees or committed fraud
- Questions regarding the trust itself, including whether the Trustor had the capacity to execute the trust, whether the document was properly signed or whether the trust was a product of undue influence
- Disputes between generations that often center on issues such as preferential treatment favoring future heirs over current family members
These matters are similar to the issues arising between family members over a will dispute, however, trusts do not require court involvement unless a trust dispute arises.
If you are having concerns regarding terms of a Trust and feel that any of these issues apply to you, or if you need trust documents reviewed or drafted, contact our office for a consultation regarding whether your situation could be cause for a trust dispute or corresponding will contest.