Trusts are a common way for people to pass on their property while saving their heirs time, money, and the need to go through probate. However, this doesn't mean that trusts are guaranteed to avoid the courtroom. The good news is that if an interested party has grounds for contesting the trust, there may be a way to resolve the problem without the need to file a lawsuit.
Alternatives to Filing a Lawsuit to Contest a Trust
One of the easiest ways to clear up confusion surrounding a trust is to request a thorough accounting from the trustee. Beneficiaries have the right to see the financial actions taken by a trustee on behalf of the trust and heirs. If the trustee refuses to provide an accounting, the court may compel the trustee to do so.
If the accounting provided doesn't account for all trust assets or contains objectionable transactions, beneficiaries can ask the court for a more detailed accounting. If the beneficiaries are not satisfied, they may enter trust litigation to remove the trustee.
If parties to the trust wish to question the terms or a trust, the actions of a trustee, or the validity of the trust itself, the matter can be resolved without litigation through:
- Settlement Agreement. Nearly any trust matter can be resolved through a binding, non-judicial settlement agreement. All parties work to find an equitable remedy for the problem, giving them more control over the result while preventing the loss of trust assets in litigation.
- Trust Modification. A trust dispute may only need clarification or modification of one or more terms of the trust. Trust modification is allowed only if the effects of the change are consistent with the settlor's purpose for the trust.
- Termination of Uneconomic Trusts. A trustee has the authority to terminate a trust with a total value under $50,000 that contains insufficient assets to justify the cost of administration. If the trustee doesn't terminate an uneconomic trust, the court has the power to modify or terminate the trust, as well as the power to remove and appoint trustees. Once the trust is terminated, the trustee must distribute the trust property in a manner consistent with the settlor's purpose for the trust.
- Trust Reformation. Any interested party may petition the court to reform the trust if certain terms don't conform to the settlor's overall intentions. This is typically done in cases of typos, unclear designations, or other errors that make the instructions significantly different from the settlor's intent. The interested party will need to provide clear and convincing evidence the terms of the trust were created by a mistake.
- Trustee Removal. Co-trustees or beneficiaries may request court removal of a trustee, or the court may remove a trustee on its own initiative. A trustee may be removed for several reasons, including breach of trust, breach of fiduciary duty, or failure to effectively administer the trust. As long as the removal is in the best interests of all beneficiaries, is consistent with the purpose of the trust, and is followed by the appointment of a suitable successor trustee, interested parties don't need extensive proof of malfeasance to remove a trustee.
- Trustee Resignation. A trustee may resign their duties with court approval or resign without court approval long as the settlor (if living), co-trustees (if any), and beneficiaries have been given 30 days notice of the intent to resign.
Let Us Advise You on Your Next Steps
In order for any of these actions to avoid ending up in litigation, it will take an experienced probate and estate lawyer to advise you every step of the way. If you are the trustee or a beneficiary of a trust, we can answer your questions and work to resolve your dispute as efficiently as possible. Contact DeLoach, Hofstra & Cavonis, P.A. to set up a consultation through our quick contact form, or start reading our free guide, The Top 20 Rules for Protecting Your Florida Estate.