Challenging a trust amendment may be necessary when the instrument contains or is based on false statements. Having said that, false statements in a trust amendment aren’t always problematic.
Say a trust amendment provides for the daughter of the trust creator (called the settlor, grantor, or trustor) to inherit $1 million from their trust. While the decedent had correctly listed his daughter’s married name in his prior trust, he incorrectly listed his daughter’s maiden name in the trust amendment. In this instance, it’s unlikely the settlor’s false statement would affect how trust funds are distributed, since the settlor’s intent to benefit his daughter was clear.
In general, invalidating a trust amendment based on false statements is generally only appropriate if the false statements at issue materially impact the trust. In other words, the false statements must have a noticeable and significant impact on the trust.
Say a decedent signed a trust amendment leaving the entirety of his home to his only son after the son lied to him about struggling financially and not being able to afford rent. The trust amendment disinherits the settlor’s daughter, who, in the prior version of the trust, stood to jointly inherit the home with her sibling.
In this instance, the son may have committed fraud, an act of deliberate deception for personal gain, which materially affected his sister’s inheritance by eliminating it. Fraud generally is a valid cause for seeking to have a trust amendment invalidated.
The son may also have unduly influenced the decedent by exploiting his vulnerability and feeding him false information, ultimately persuading the decedent to override his own free will and amend his trust to favor the son. Undue influence is also generally a valid reason for seeking to have a trust amendment invalidated.
It’s important to keep in mind that trusts are complex legal instruments, and that what might be construed as a problematic false statement in one context may not be construed as a problematic false statement in another. For this reason, it’s always best to consult with a qualified trust attorney before taking legal action to invalidate a trust based on false information to ensure a simpler remedy can’t be used to resolve the dispute.
What Is a Trust Amendment?
A trust amendment is a legal instrument that changes specific provisions of a trust. Settlors often execute trust amendments when their life circumstances change. For example, a settlor may amend their trust if they get married or have a child. In the same vein, they may amend their trust if they have a falling out with a family member.
So long as a trust is revocable and the settlor is competent, they can execute a trust amendment for any reason. It may also be possible to amend an irrevocable trust as well; however, the process for amending an irrevocable trust is typically more complicated than the process for amending a revocable trust. For example, to amend an irrevocable trust, the settlor and trustee may be required to obtain unanimous consent from the trust beneficiaries and/or court approval. The same isn’t true for revocable trusts.
When Can a Trust Amendment Be Challenged?
There are many circumstances that may justify the filing of an action to challenge a trust amendment.
Perhaps the trust amendment was created as a result of fraud, undue influence or another valid ground for contesting a trust.
Perhaps the trust amendment contains ambiguous language.
Perhaps the trust amendment disposes of more than the settlor’s 50% share of the community property.
Perhaps there is evidence to show the trust amendment had previously been revoked.
In all these examples, there is potential for the trust amendment at issue to obfuscate the settlor’s true intent and materially alter the dispositive provisions of their trust. Therefore, challenging it may be warranted.
There are many ways a trust amendment can be challenged. For example, it can be contested. It, likewise, can be submitted to the court to be formally interpreted or reformed. To determine which legal remedy is most appropriate, consulting with a qualified trust attorney is recommended.
When Might Invalidating a Trust Amendment Based on False Statements Be Appropriate?
Seeking to have a trust amendment invalidated based on false statements may be appropriate if the amendment in question was unlawfully obtained or wrongly alters the dispositive provisions of a trust.
Remember, to invalidate a trust amendment, you must be an interested party (i.e., someone with a financial stake in the outcome of the matter) and, in general, the settlor must be incompetent or dead in order for beneficiaries to have standing to contest the trust.
Settlor Impacted by False Statements
When someone makes false statements to a settlor, which then causes the settlor to amend their trust, it may be possible to have the trust amendment invalidated after the settlor loses capacity or dies.
Discover the different forms false statements can take from the sections that follow. Keep in mind that more than one form can apply. For example, someone could cause a settlor to amend their trust by using fraud and undue influence.
Fraud
When one person intentionally misleads another person for personal gain, it may be considered fraud.
There are two main types of fraud. Fraud in the inducement occurs when a person is deceived into signing a legal document, such as a trust amendment, through false statements about material facts. On the other hand, fraud in the execution occurs when a person is deceived into signing a legal document without being informed of the nature of the document they are signing or its implications.
Suppose a decedent had been told by her spouse that her children were bad-mouthing her and wanted nothing to do with her, causing her to disinherit them and leave everything to her spouse. Her children, however, had never bad-mouthed her and had no intention of distancing themselves from her.
In this instance, it may be appropriate for the trust amendment in question to be invalidated, since the false statements made to the settlor not only could be construed as fraud, but because they materially affected the dispositive provisions of the trust as well.
Undue Influence
When one person exerts excessive pressure on another person to cause them to act against their own free will, it may be considered undue influence.
While undue influence doesn’t always involve false statements being made to the settlor, there are times when it does. Suppose the settlor’s live-in caregiver continuously lies to the settlor about their children not caring about them. Even though the caregiver’s manipulation is subtle, it causes the settlor to execute a trust amendment replacing their children as the beneficiaries of their home with their caregiver.
In this instance, it may be appropriate for the trust amendment in question to be invalidated, since the false statements made by the caregiver could be construed as undue influence.
Mistake of Fact
When a person makes false statements to another person, which then causes the other person to make a decision based on an incorrect belief, it is considered a mistake of fact.
Like with undue influence, mistakes of fact don’t always involve false statements, but they can. Suppose a decedent’s spouse misinformed the decedent about the negative tax consequences of certain provisions of their trust, leading the decedent to execute a trust amendment revoking those specific provisions. In reality, those trust provisions did not have negative tax consequences. It’s just that the spouse benefited more from the provisions being invalidated.
In this instance, it may be appropriate for the trust amendment in question to be invalidated, since the false statements made by the spouse caused the decedent to not only revoke the original provisions of their trust under false pretenses, but also provide a greater share of their trust to their spouse than they’d originally intended.
Settlor Made False Statements
If it comes to light that a settlor made intentional or unintentional false statements in a trust amendment, which serve to obscure their intent, it may not be necessary to have the trust amendment invalidated, but guidance from the court may need to be sought to ascertain the settlor’s true intent.
Inaccuracies
Inaccuracies in a trust amendment are not always a cause for concern, but they can be if they materially affect or obfuscate the dispositive provisions of a trust. Inaccuracies can include everything from a decedent having listed the wrong address for a trust property to misspelling the name of a beneficiary.
Suppose a settlor executes a trust that passes on his lucrative business to his sister. Later, and after he has cognitively declined, he executes a trust amendment that changes, among other things, the beneficiary of the business from his sister who is still living to a sister who is deceased.
In this instance, even though the decedent’s error may have been caused by their lack of capacity, invalidating the trust amendment may not be necessary if the trustee seeks guidance from the court on how to interpret the amendment or all the beneficiaries agree on the decedent’s true intent.
Misrepresentation of Relationships
If a decedent made false statements in a trust amendment about certain beneficiaries or heirs, or their relationships with them, to justify disinheriting them, it’s possible fraud or undue influence could have been the culprit. Both fraud and undue influence are valid reasons for seeking to invalidate a trust.
Suppose a decedent executed a trust that provided his three daughters with equal shares of the trust. However, after learning from two of his daughters that his other daughter had substance abuse issues, he executed a trust amendment removing his other daughter as a beneficiary of the trust. In the instrument, he claimed he was disinheriting his daughter due to her drug use. The daughter didn’t understand where her father got this idea, since she had never touched an illicit substance. She surmises that her sisters must have lied to her father, causing him to disinherit her.
In this instance, it may be appropriate for the trust amendment in question to be invalidated on the basis of fraud, since two of the settlor’s daughters had intentionally misled the decedent to gain at their sister’s expense.
Key Considerations When Invalidating a Trust Amendment Based on False Information
It bears repeating: False information in a trust amendment generally isn’t problematic unless it materially alters the way in which trust assets are distributed.
To determine whether a trust amendment is problematic, consider the questions that follow.
Does the false information affect the validity of the trust amendment?
If false information causes a trust amendment to stray from a decedent’s known final intentions, there is a chance the trust may be invalid. In such a situation, it is crucial you consult with a skilled trust contest attorney about potentially contesting the trust.
Remember that a trust can only be contested on certain established grounds. The grounds for contesting a trust are:
- Fraud
- Undue Influence
- Forgery
- Lack of Capacity
- Mistake of Fact
- Lack of Due Execution
- Revocation
Is the false information material?
If the false information in a trust amendment is immaterial (i.e., it has no significant impact on the dispositive provisions of the trust), it may not be necessary to have the trust amendment invalidated.
That said, other remedies, such as judicial reformation, may be available if minor errors in a trust need to be fixed.
Did the settlor act in good faith?
If it’s apparent the decedent was acting in good faith when they made false statements in a trust amendment, it may not be necessary to have the trust amendment invalidated.
For example, if a decedent executed a trust amendment removing a property from their trust because their real estate agent had misinformed them that the property had been sold, this may mean that the decedent amended their trust in good faith (i.e., they amended their trust believing they were making true statements) rather than maliciously to hide assets.
It might be reasonable in this type of scenario to seek modification of the trust, but suing to recover damages or to have the trust invalidated may be a step too far since the decedent had acted in good faith.
How to Invalidate a Trust Amendment Based on False Information
To invalidate a trust amendment based on false information, you generally must follow the steps for contesting a trust, which are described below. Where contesting a trust is unnecessary or improper, you may be able to challenge the trust amendment without contesting it.
1. Review the Trust Instrument
Start by thoroughly inspecting the trust instrument and any amendments attached to it to determine whether the trust contains red flags.
For example, you may consider whether the trust amendments are a drastic departure from the decedent’s original intent, which may indicate the amendments were created under false pretenses and are invalid.
2. Consult with a Trust and Will Dispute Attorney
If you’ve discovered red flags in a trust instrument or its amendments, it’s crucial to present them to a trust and will dispute attorney to determine whether legal action can be taken to invalidate, reform or clarify the meaning of the false statements.
Asking your attorney to inspect a trust instrument or amendment may be a good idea, even if you haven’t noticed any red flags. This is because attorneys have been trained to spot subtleties their clients might have missed.
By consulting with a qualified attorney, you can help ensure you seek the appropriate legal remedies for the problems you are facing and the outcomes you desire.
3. File a Petition with the Probate Court
By this step, you should have a general idea of which statements in a trust instrument or amendment may be false. Remember, you can’t claim a trust instrument or amendment is false merely because you don’t agree with it. You must have strong evidence and arguments to back up your claims.
If the trust instrument or amendment was created as a result of false statements made to the decedent, then seeking to invalidate the instrument may be the most appropriate course of action. Conversely, if a decedent made false statements in a trust instrument or amendment, then seeking clarity about the meaning of the statements or judicial reformation may be the most appropriate course of action.
Each of these remedies is described in more detail in the following sections.
Petition to Invalidate Trust
A petition to invalidate a trust can be filed to contest a trust. When a trust is successfully contested, the trust or trust amendments at issue will be voided, causing assets to be distributed according to a prior valid version of the trust. If there was no prior valid version of the trust, assets will be distributed according to the decedent’s will. If there was no prior valid will, assets will be distributed according to intestate succession laws.
Petition for Instructions
A petition for instructions can be filed to obtain guidance from the court on how to interpret confusing or ambiguous terms of a trust. It is usually the trustee who files this petition.
Trustees should avoid interpreting such terms themselves, as certain beneficiaries are bound to be adversely affected by their interpretation and could sue the trustee for breaching their fiduciary duty of impartiality.
Petition for Judicial Reformation
A petition for judicial reformation can be filed when errors or oversights in the trust instrument obscure the intent of the settlor. However, keep in mind that judicial reformation is only available under narrow circumstances.
Filing a petition for judicial reformation may be unnecessary if the true intent of the settlor is clear, and all the beneficiaries provide unanimous consent for the trust to be modified to reflect the settlor’s true intent.
4. Gather Evidence
Once you’ve filed your petition, you will want to gather evidence to support your claims. Evidence can come in the form of documents, financial records, capacity declarations and even witness testimony.
It is important to allow your attorney to take the lead during the evidence-gathering stage of litigation, as they will know the type of evidence to look for to best support your claims.
5. Consider Settling
If the parties are open to settling the case at mediation (i.e., negotiations held outside of court that are presided over by a neutral third-party mediator), it can help keep costs minimal and the administration of the trust on track.
Trials tend to be long, expensive and emotionally taxing. If they can be avoided, beneficiaries are likely to receive their inheritances faster and with fewer headaches.
6. Attend Court Proceedings
On the day of your court proceedings, arrive punctually to the correct courthouse accompanied by your attorney. Your attorney will need to be present to make arguments on your behalf in front of the judge.
Still have questions about invalidating a trust amendment based on false information?
If you’re uncertain whether false statements made to a settlor or by a settlor could be grounds for invalidating the trust amendment, our experienced probate attorneys are here to provide you with the clarity you need.
As a firm specializing exclusively in trusts and estates, we excel at identifying problematic trust instruments and resolving disputes efficiently. Our goal is always to ensure beneficiaries receive the inheritance they are entitled to. Reach out now to learn how we can assist.
