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How to challenge a trust and what to expect

It sounds like it could have come from the pages of a John Grisham novel. Rather than leaving a will, the deceased, your grandfather, created a trust. As it turned out, this trust specified just two beneficiaries for his considerable estate. Your grandfather left you—his only living relative—$100,000. However, his live-in housekeeper of the last two years is set to receive $4.75 million and controlling interest in his business.

Something doesn’t smell right and you decide that contesting the trust may well be your best course of action.

What is a trust?

At its simplest, a trust is a legal agreement between the grantor (the person creating the trust), the trustee (the person responsible for administering the trust) and the beneficiaries. The process begins with the grantor transferring assets into the trust. The trustee then manages the trust for the beneficiaries.

Some common trusts used to manage assets include:

  • Special needs trusts: Provides resources for a child or adult with special needs without adversely impacting eligibility for government benefits such as Medi-Cal and Medicaid.
  • Revocable living trusts: This trust goes into effect during the grantor’s lifetime and can be easily modified or amended. Often, the grantor, trustee and beneficiary are the same person, with another trustee specified should the creator pass away or become mentally incapacitated.
  • Irrevocable trusts: Beneficial for tax planning, as well as investment purposes, this trust moves assets out of the grantor’s estate.

What makes a trust different than a will?

A key difference between the two is that a will goes into effect after you die, while a trust takes effect after it’s created. There are features of a trust that sets it apart:

  • Quick asset transfer: Without the need for probate court, asset transfer can typically happen much faster than with a will.
  • Cost reduction: Avoiding probate and estate taxes can save you money.
  • Privacy: Your financial affairs won’t become part of the public record.
  • Control: You can control what happens to your assets after you have passed away.

Can I dispute the trust?

Yes, but only a beneficiary or a person who would have inherited had there not been a trust, can challenge the trust. Typical reasons for challenging a trust include:

  • Undue influence: Were provisions added that creates benefit for the influencer? Threats, withholding care or resources, or manipulation can all influence the trust signer.
  • Lack of capacity: Did the grantor lack mental capacity to understand the trust?
  • Improper formation: Are there missing signatures, ambiguous language or a more recent trust?
  • Fraud: Did the signer believe they were signing a different document or one with different provisions?

What to expect when you challenge a trust

First, the person contesting the trust initiates the process with the help of qualified legal counsel. Unlike contesting a will, you are not already in court. You’ll need to file a petition in probate court.

Second, you must have facts that show why the trust should be set aside. In the example above, you must show the undue influence that your grandfather’s housekeeper had on him.

If the court finds sufficient reason to set aside the trust, the trust assets will be distributed according to California law.

An important caveat: If you challenge a trust and lose the case, you may lose your right to receive the assets from the trust. 

As you can see, contesting a trust can be done, but it is vital to have an attorney evaluate the facts and circumstance before proceeding to court.

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