Tips for Choosing to Pursue Trust Litigation

Are you thinking of litigating your family trust over venue or based upon who was selected as trustee(s)? Before you jump into litigation, it may be wise to meet with a Florida Probate Litigation Attorney or Trust Litigation Attorney who is experienced in a variety of probate and trust litigation issues. You may want to determine whether the trust will benefit from the litigation or will it become very costly outweighing the benefits of the litigation. For instance, in the Jeno Paulucci family trust battle valued at approximately $150 million, it all began after Mr. Paulucci’s death when his three children filed petitions regarding their right to fire the most recently appointed trustees and reinstate the original trustees from Minnesota.

On one hand, all three children wanted the venue to be in Minnesota.  On the other hand, the trustees wanted the venue to be in Florida where most of the assets are located.

Trust Litigation & Disputes

Trust litigation, like probate litigation, can arise for many reasons. Most trust litigation falls into one of two categories: issues with the trustee or allegations that a trust is invalid. It’s important to know when and how trust litigation can help an interested party preserve the value of a trust, recover assets, or ensure that the grantor’s true wishes are carried out.

However, it’s equally important to recognize that trust litigation isn’t always the best answer. Litigation can be time-consuming and expensive, and may leave the contesting party with less than he or she would have received without the litigation.

This post provides an overview of the types of trust litigation, when they’re appropriate, and what factors should be considered in determining whether or not to pursue litigation. But every situation is different. If you’ve encountered problems with a trust or have reason to believe a trust is invalid, it’s in your best interest to talk with an experienced trust litigation attorney before you make any decisions.

Types of Trust Litigation

Trustee-related Litigation

Litigation involving the trustee typically arises when a beneficiary or other interested party believes that the trustee is not fulfilling his or her obligations.Florida law provides sets forth several specific reasons that a trustee may be removed from the role, ranging from unfitness or lack of cooperation between co-trustees to breach of trust.

In some limited situations, the trustee may be personally liable for losses related to his or her actions.

Challenges to the Validity of a Trust

Challenges to the validity of the trust also generally fall into two categories. The first is a failure of form. In simple terms, that means that some legal or procedural requirement was not followed in the creation of the trust, and so the trust was never properly formed.

The second goes to the capacity of the grantor to create the trust and the voluntary nature of its creation. Some examples include:

• Allegations that the grantor was suffering from some form of cognitive impairment, such as Alzheimer’s disease or dementia, when the trust was created, and
• Claims that the grantor was defrauded or coerced in the creation of the trust

Each of these seems like a good reason to challenge the trust or take action to remove the trustee. And, those claims are often justified. However, beneficiaries and other interested parties must weigh the costs and benefits in deciding whether to pursue trust litigation.

The Pros and Cons of Trust Litigation

The possible benefits of trust litigation are obvious: litigation is a means of solving a perceived problem, such as a negligent trustee or a trust that doesn’t accurately reflect the intentions of the grantor. But there are potential pitfalls, as well. The considerations differ depending on the problems you’re looking to address, relationships with others who are affected, the value of the trust and more. Some core factors to consider are:

• What is the overall value of the trust and the potential gain associated with the litigation?
• How serious are the problems litigation would address?
• What impact will the delay associated with the litigation have on interested parties?
• How will trust litigation impact family relationships, and how important is that to you?
• How much will trust litigation cost, especially relative to the potential gain and/or value of the trust assets?

An experienced trust litigation attorney can help make this assessment by explaining:

• The potential remedies available to you
• The strengths and weaknesses of your case
• The amount of time and anticipated cost associated with pursuing the claim

Trust and probate-related issues are often emotional, since they frequently arise following the death of a loved one and may involve family conflicts and a sense of betrayal. But, it’s rarely a good idea to make legal and financial decisions based on emotion. That’s one reason it’s helpful to get professional guidance as soon after you identify potential problems as possible.

How to Avoid Trust Litigation

The grantor of a trust can take several steps to help beneficiaries and other interested parties avoid costly and stressful trust litigation. Of course, every situation is different. Some common examples include:

• Working with an experienced trust attorney to ensure that the trust is properly created and not subject to challenge
• Make sure that your wishes are very clearly laid out in plain English, and are not open to interpretation
• Carefully selecting the trustee or trustees, based not just on personal relationships but also on the appointed person’s integrity and capacity to responsibly and effectively carry out the duties of the trustee
• Considering whether it might be beneficial to discuss the terms of the trust with beneficiaries and any other interested parties around the time of creation, to ensure that they understand your thinking and recognize that you are clear-headed and acting of your own free will
• Leaving behind a letter that explains your thinking, not as a legal document but to help your loved ones understand and hopefully come together in support of your wishes
• If there’s a chance that advanced age or a medical condition might cause someone to question your capacity to create the trust, talking with your doctor about what would be required to get a clean bill of cognitive health in writing

A trustee can also minimize the risk of trust litigation by working with an experienced trust litigation attorney, fulfilling all of his or her duties in a timely manner, keeping clear records, and keeping interested parties informed.

Get the Help you Need with Trust Litigation Issues

Whether you’re creating a trust, have been appointed trustee, or are already facing the possibility of trust litigation, reliable information about your rights and options can be your most powerful tool. Florida Estate Planning Attorney Thomas Upchurch has represented Florida residents in estate planning, trust administration, and trust litigation issues for decades. To learn more about how Upchurch Law can help you define and take the next steps, schedule a consultation right now. Just call 386-320-6169 or fill out the contact form on this page.