Trusts are an important part of many people’s estate plans. They help beneficiaries avoid probate court and guardianship court, and they can provide useful asset protection for beneficiaries. That doesn’t mean it is always smooth sailing. Sometimes issues arise with trusts that require the assistance of a legal professional. At Upchurch Law, we’re experienced in handling estate litigation and trust contests. We know it is a trying time for you and your family, so we’re there to handle the legal issues and take the stress off your plate.
Types of Trusts
There are many different types of trusts, and they all serve different purposes. You may be a beneficiary of one or more different types of trusts, as many people use a mix of trusts in their estate planning. Common trusts in Florida include:
- Revocable living trust – Revocable living trusts (RLTs) are the most common type of trust in Florida. With an RLT, the trust is put into place while the grantor is alive, and the trust can be amended or revoked at any time by the grantor. RLTs are a popular way for grantors to pass on their assets without going through the probate process.
- Irrevocable living trusts – As evidenced by the name, irrevocable living trusts (ILTs) cannot be amended or revoked by the grantor. When an asset is put into an ILT, the asset becomes the property of the trust, and the asset will be protected from the probate process and estate taxes.
- Testamentary trusts – Testamentary trusts are contained in an individual’s will and only come into effect when the individual passes away. Testamentary trusts are most useful when an individual wants to leave assets to another person but doesn’t want them to get the assets until a certain point (for example, when the individual turns 18).
- Medicaid trusts – Medicaid trusts are used by individuals to ensure that their beneficiaries will receive their assets, even if that individual needs long-term nursing care. These trusts act as a shelter, meaning that the assets they contain cannot be used to cover the costs of long-term nursing care.
Who Can Contest a Trust
The only people who can contest a trust in Florida are those who have trust standing. To have standing, you must show that you have a direct interest in the trust, a prior trust, the trustee, or the grantor. The most common people who have the standing to challenge a trust are family members of the grantor and anyone who was named in a prior trust. Alleging and proving that you have standing is part of the process when you file a lawsuit. An experienced attorney can help you evaluate your claim to determine if you have the appropriate standing to contest a trust.
Process of Contesting a Trust
The first step in contesting a trust in Florida is to retain an experienced estate attorney. The full process of contesting a trust can be complicated, and it’s important that you have someone who is knowledgeable about the process to guide and advise you.
When you contest a trust, there are several ways it can be handled. Your attorney will review the facts at hand and help you determine the best way to proceed.
- Settle outside of court – If the parties come to an agreement, they can create a non-judicial settlement agreement, which is handled completely outside of the court system.
- Court case – If the parties cannot come to an agreement or do not wish to try and negotiate, you can file a case in court. You and your attorney will work together to provide documentation and evidence supporting your claim. The court will then rule on your case and may determine that changes in the trust need to be made.
Reasons for Contesting a Trust
There are many reasons why someone may contest a trust, including:
- Lack of capacity of the grantor –To create a trust, the grantor must be mentally competent. To lack the requisite mental capacity, you must show that at the time of signing, the grantor did not understand the terms of the trust, did not understand the property going into the trust, did not understand who would benefit from the trust, or did not understand how the trust will handle the grantor’s property. Most often, lack of capacity is caused by illnesses such as dementia or by prescription medications being taken.
- Undue influence – You may also contest the trust due to undue influence. Undue influence means that the grantor was coerced, threatened, or under duress when creating the trust and that undue influence overruled the grantor’s wishes.
- Improper execution of the trust documents – Florida has a trust code that dictates how a trust must be executed. The trust must be signed by two witnesses and the grantor. The witnesses must observe the grantor signing the documents. All parties should sign at the bottom of the documents and in blue ink.
- Trustee mismanagement – If a trustee breaches their fiduciary duty, the trust can also be contested. Trustees must act in the interest of the trust beneficiaries and cannot act in ways that are self-beneficial. Common ways trustees breach their fiduciary duties include:
- Improper management of trust assets
- Improper accounting of trust assets
- Failure to defend the trust against third-party claims
- Self-dealings, such as taking personal loans from the trust
Rights of Trust Beneficiaries
The general rights of a trust beneficiary are to be kept informed of the trust and the trust administration. A trustee’s refusal to provide information to keep the beneficiaries informed is a common cause of dispute. Even if the trustee is not acting maliciously (but rather is unaware of or overwhelmed by the trustee’s obligations), the trustee is still in violation of their legal obligations to the beneficiaries.
To what information is a beneficiary entitled?
Florida law requires that a trustee keep accurate records of the trust assets and that some of these records be provided to the trust beneficiaries to keep them reasonably informed. The information that must be shared with the trust beneficiaries includes:
- Notice to the qualified beneficiaries within 60 days of acceptance of the trust that the individual has agreed to serve as trustee, which must include the trustee’s full name and address.
- Notice of the creation of any irrevocable trust or, if a revocable trust becomes irrevocable, within 60 days of the trustee becoming aware of the information, along with the identity of the grantor.
- A copy of the entire trust document if requested by a qualified beneficiary.
- Detailed trust accounting, which contains relevant information about the assets and liabilities of the trust and includes a copy of the Schedule K-1 filed with the trust’s taxes. This accounting must be provided at least once per year and must be presented to the beneficiaries in a reasonably easy-to-understand format. This duty to provide accountings only arises if the trust is irrevocable. Further, a qualified beneficiary can waive their rights to receive this accounting and can revoke that waiver at any time.
- Information about the particulars related to trust administration, including disclosure of all fees paid to the trustee and any professionals the trustee hired on behalf of the trust, such as an accountant or legal counsel.
Other Rights of Beneficiaries
Trust beneficiaries have additional rights outside of being provided information. A trust beneficiary has the right to require that the trustee protect the assets of the trust, even if that requires legal action. The trustee has a duty to act in the beneficiaries’ best interest, which includes a duty to avoid self-dealing, conflicts of interest, or exorbitant expenses. The trustee must also act impartially toward all beneficiaries.
What if the trustee fails to act appropriately?
A trustee who fails to provide the necessary information to beneficiaries and engages in self-dealing or favors one beneficiary may be in violation of the fiduciary duty the trustee owes to the beneficiaries. If the beneficiary feels that there have been improper expenses or self-dealing, the beneficiary can petition the court to void those transactions or can seek to hold the trustee personally accountable for the expenses. The beneficiary can also seek to have the trustee removed from their position. These actions can be taken by going to court or sometimes can be resolved by negotiations between the parties and their legal representatives.
Contact an Experienced Estate Litigation and Trust Contest Attorney
If you have reason to think you need to contest a trust, or if you’re concerned that your rights as a beneficiary are being violated, reach out to an experienced estate litigation attorney. It’s important that you assert your rights and make sure the trust is being handled appropriately. At Upchurch Law, we understand how important it is to protect your rights and will work tirelessly to ensure you and your family are taken care of.
Contact Upchurch Law Estate Litigation and Trust Contest Attorney to see how we can help you.