Can You Contest a Trust?
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Jim Bush, Partner at Keystone Law Group, discusses whether a decedent’s trust can be contested. Read the complete article below for more details. Click the YouTube Channel subscribe button to be notified when new videos are published.
Suppose that a decedent executed a trust that left everything to their new spouse instead of their children, even though the decedent had previously informed their children that they would be receiving the majority of their assets. Can a trust be contested on these grounds?
Or, perhaps a decedent executed an amendment to their trust that drastically changed its contents after they had been diagnosed with dementia. Can a trust be contested on these grounds?
Contesting a trust in the aforementioned scenarios would not just be warranted but could be recommended. In the former scenario, it may have been that the decedent’s new spouse unduly influenced the decedent into drastically altering their trust to disinherit their own children. In the latter scenario, the decedent may have executed a trust when they did not have the mental competence required to make such a change.
While there are other reasons for disputes over a trust, the two examples provided above are common fact patterns in trust contests. If you are unsure about whether contesting a trust is the right move, it is a good idea to consult with a trust contest lawyer, who not only can review the trust instrument with you but also determine whether you have the standing and grounds required to bring a trust contest. We will go into more detail about what standing and the grounds for contesting a trust are in the next section.
What Are the Rules for Contesting a Trust?
Can a living trust be contested? Can a trust be contested if you only wish to challenge the trust amendment but not the underlying trust? Can a trust be contested if you only wish to challenge certain provisions? Can you contest a trust if you believe that the settlor (i.e., the creator of the trust) had been exposed to elder financial abuse? Can you contest a trust if you are not a beneficiary or heir? Can you contest a trust without help from a lawyer? What are the chances of successfully contesting a trust?
If you are asking these questions upon learning that you have been named as a trust beneficiary or trustee of a trust, you are on the right path. Perhaps the trust seems to contradict the true final wishes of the decedent or leaves the majority of trust assets to non-family members. Whatever the reason for your concern, it is good you are asking these questions about contesting a trust. The more you know, the better your chances of winning your trust contest.
First, let’s review what a trust contest is. A trust contest is a type of petition filed in a court proceeding in which a decedent’s trust is examined by the court to determine whether it should be invalidated. The court may invalidate a trust or trust amendment on account of it being a product of undue influence of fraud, or because the settlor did not have the required mental capacity to execute a trust.
It is common for beneficiaries and heirs to be unhappy with the inheritances they were left, but contesting a trust on these grounds alone will not cut it; more compelling reasons must exist for contesting a trust. So, for what reasons can a trust be contested? Keep reading to find out.
If you are seeking to dispute the validity of a will, read our article on contesting a will.
What Are Some Valid Grounds for Contesting a Trust?
Suppose that you were the caretaker for your parent throughout their life. Even after you had your own family, you kept your parent in your home and tended to their needs. Your siblings, on the other hand, barely ever visited your parent and never cared for them like you did. When your parent died, you were taken aback to learn that your parent had left you and your siblings equal shares of their trust. Can you contest a trust because you believe you are deserving of a larger inheritance than your siblings?
While it does seem like an unusual choice for the deceased parent in this scenario to not leave a little extra for the child who cared for them, a trust cannot be contested on this ground alone. On the other hand, if it comes to light that the siblings deceived your parent into believing that they were struggling to make ends meet, even though they were not (i.e., they engaged in fraud), and that’s why your parent left them the same percentage of the trust as you, then you could have valid grounds for bringing a trust contest if a prior version of a trust was changed to reduce your share. A trust cannot be contested because you believe you are deserving of a more substantial inheritance or believe the provisions of a trust to be unfair.
If you are wondering how to contest a trust in California successfully, the first step is to make sure the trust instrument meets the grounds for contesting a trust, which are:
- Undue Influence: Excessive persuasion had been used to convince the decedent to make drastic changes to their trust.
- Lack of Capacity: The decedent lacked the necessary mental competence to execute a trust when they did.
- Elder Abuse: Financial, physical or psychological abuse had been inflicted on the decedent, and it played a role in their signing of a new trust or amendment.
- Fraud: The decedent was deceived into changing or executing their trust.
- Forgery: A trust or amendment was fraudulently signed by someone other than the decedent.
- Mistake: The decedent executed a trust by mistake or was mistaken about the laws surrounding the execution of a trust.
- Revocation: The decedent revoked their trust by executing a new trust, modifying their old trust or outright destroying it.
Contesting a trust can be difficult if your reason for doing so falls outside the grounds mentioned above; nevertheless, speaking with a trust lawyer about your concerns is never a bad idea. The trust lawyer will be able to provide you with a definitive answer about whether or not contesting a trust is possible. It is important to keep the time limit for contesting a trust in mind, because you only have 120 days from the date the trustee mails notification of administration to bring your contest. Of course, to contest a trust, you will also need to have standing, which we discuss in the next section.
What Is “Standing” in Trust Contests?
Contesting a trust also comes down to something known as “standing,” which refers to whether the party seeking to bring the trust contest has a financial stake in the outcome of the matter.
To have standing to contest a trust, the trust at issue should provide you with less than you would receive if the trust were set aside. In other words, if the trust being voided would mean that you receive more from the trust, you have standing. Conversely, if you stand to receive more under the trust you are seeking to contest, you would not have standing to contest the trust.
In most instances, those with standing in trust contests include beneficiaries, heirs of the deceased settlor and the trustee.
Can You Contest a Trust in Its Entirety?
Yes, it is completely possible to contest an entire trust. In many instances, contesting a trust in its entirety may be the only proper course of action. If, for instance, a decedent visited their estate planner to create and execute a trust while suffering from advanced dementia, it might make sense to try to have the whole trust instrument set aside. Although it is important to keep in mind that to contest a trust on the basis that the decedent had lacked capacity, documentation from the decedent’s physicians as well as testimony from persons close to the decedent may be needed to corroborate your claim.
Can You Contest a Trust Amendment?
Yes, it is possible to contest just a trust amendment without contesting the trust that underlies it. Usually, trust amendments are separate legal documents that are executed at some point after the creation of the original trust, so the original trust could have been executed at a time when the decedent had been mentally competent, but the amendment could have been executed at a time when the decedent had lacked mental competence.
Let us demonstrate with an example. Perhaps the decedent had gone to their estate planner while fully competent to execute a trust. Several years later, the decedent, after suffering a stroke that rendered them cognitively impaired, executed a trust amendment that drastically altered the provisions of the original trust. If it can be proven the decedent lacked capacity at the time they executed the trust amendment, the amendment can be voided without the original trust being affected.
What Happens to Trust Assets After a Successful Trust Contest?
If you are able to successfully demonstrate that a trust is invalid, trust assets will generally be distributed in accordance with the provisions set forth by the decedent’s previous estate planning documents (so long as they were valid).
If the decedent never executed any prior estate planning documents that were valid, the assets being held by the trust will become part of the decedent’s intestate estate and ultimately be distributed to the decedent’s heirs through the process of intestate succession. Those who typically stand to inherit from intestate succession are the surviving spouse and children of the decedent. If the decedent did not have a spouse or children, their assets will pass to their parents and siblings.
What Are the Differences Between Contesting a Trust and Contesting a Will?
As previously stated, a trust can be set aside if a court finds that the trust had been executed during a time in which the decedent lacked capacity, or if the trust was procured through undue influence, fraud, mistake, duress or menace. The grounds for contesting a will are basically the same with one occasional exception, which will be discussed below.
Contesting a Trust/Will on the Basis of Mistake
The grounds for contesting trusts and wills are basically the same, with one rare exception: mistake. The conditions that must be met to set aside a trust on account of a mistake are substantially less rigid than the conditions that must be met to set aside a will on account of a mistake. A trust can be voided if the settlor was mistaken about any law or fact related to the instrument’s execution, whereas a will can only be voided if the decedent was mistaken about the nature of the document they were signing (i.e., they thought they were signing another type of legal document when they were actually signing a will).
For example, Keystone represented a client who had been competent in her everyday life but had been drugged by her son in order to make her execute an irrevocable trust, which contained most of her assets and named her son as the sole trustee. The document was created by mistake, because she had been cognitively impaired when she created it, but when she regained capacity, she immediately was aware of the fact she had signed away all her assets. It was not difficult for Keystone’s trust and estate attorneys to prove to the court why the irrevocable trust should be set aside. If the client had created a will under the same circumstances, it might have been more difficult to convince the court to set aside the document.
Can a Trust Be Contested If It is Unsigned?
Most of the time, an unsigned trust is considered invalid by default, so you will not have to go through the process of contesting the trust to have it deemed invalid by the courts. There have been instances, however, where an unsigned trust has served as proof of the settlor’s dispositive intent.
For example, Keystone represented a decedent’s son who was involved in a dispute with the decedent’s spouse over whether the decedent created a valid trust leaving multiple parcels of real property to Keystone’s client. Keystone argued that a trust existed notwithstanding the fact that no one (including the son) had a copy of it, but the spouse expressly denied that such a trust ever existed. Keystone obtained testimony from the drafter of the trust, who both prepared the trust and saw the decedent execute it. Subsequent to the drafter’s deposition, the spouse produced unsigned copies of the trust. As a result, Keystone negotiated a settlement on terms similar to what the son would have obtained if he had successfully litigated this case through to judgment.
Can an Irrevocable Trust Be Contested?
While the contents of an irrevocable trust cannot generally be revoked or amended, especially not by the settlor, they can be contested on the same grounds that any trust can be contested — which can ultimately lead to a trust or trust amendment being nullified.
So the short answer is yes: an irrevocable trust can be contested.
Can a Trust Be Contested If the Instrument Is Handwritten?
Because, unlike wills, trusts do not pass through probate, the standards for trusts are substantially less stringent, and a handwritten trust will likely hold up in a court of law. In fact, so long as a trust is in writing — whether typed or handwritten on a scrap piece of paper — and signed by the settlor, it may be considered valid. Witnesses are not needed, nor are notary acknowledgments.
Can a Trust Be Contested If It Has a No-Contest Clause?
A no-contest clause in a trust does not mean that a trust cannot be contested; it simply means that there are risks associated with contesting the trust.
Let us explain. If a trust has a no-contest clause, and a beneficiary contests the trust and loses the contest, they risk having to forfeit their inheritance. If they win their contest, the no-contest clause will have no effect.
Just because there is a risk involved in contesting a trust with a no-contest clause, it does not mean you should not pursue a contest if you have a valid reason for doing so. Also, in recent times, no-contest clauses have become more difficult to enforce.
If you are considering contesting a trust with a no-contest clause, it is best to speak with a lawyer before proceeding further so they can evaluate the risks involved. In one particular case, trust beneficiaries forfeited $10 million by contesting a trust with a no-contest clause and losing their case.