Trust-Based Business Successions
An unfortunate percentage of family-owned businesses perish within a generation.
Since succession can complicate an enterprise’s day-to-day operations, forward-thinking entrepreneurs may create comprehensive estate plans to accommodate their financial interests. Trusts—legal vessels that can own, maintain, and redistribute a variety of tangible and intangible assets—are often used to facilitate the intergenerational transfer of wealth.
Business owners would generally be advised to establish a revocable living trust. Small business owners may elect to fund a revocable living trust, which allows its founder—the settlor—to retain control over the trust’s assets while they are still alive. Once the settlor passes away, their designated successor trustee will manage the trust on their behalf, delegate roles, and distribute inheritances.
Challenging the Conditions of a Trust
Anyone seeking to challenge the terms of a trust must be able to establish that they have the standing to file a trust contest. In legal parlance, “standing” refers to a petitioner’s capacity to file a lawsuit or other claim. Under Florida law, qualified trust beneficiaries typically have the requisite standing to contest a trust.
However, a beneficiary cannot challenge a trust simply because they believe they were unfairly deprived of an inheritance. A trust could be contested if an heir believes that:
- The trust is invalid. Florida laws require that trust documents be signed by the trustor and at least two impartial witnesses. If a trust was not properly executed, then its existence could be challenged. However, beneficiaries should exercise some caution when contesting the validity of a trust. If the court finds that the trust is not valid, then its assets could be redistributed in a manner that does not favor the heirs.
- The trustor was subject to undue influence. If the trustor was coerced or fraudulently induced to make certain estate planning decisions, then the trust—or elements thereof—could be found invalid by a Florida court.
- The trustor lacked the legal capacity to make estate planning decisions. Florida law requires that the trustor have the mental capacity to understand not only that they are forming a trust but how the formation of the trust will affect their assets and heirs.
Since trust contests are a form of probate litigation—or lawsuit—they should be considered with care and initiated only after consulting an experienced Florida probate litigation attorney.
Challenging the Decisions of a Trustee
The successor trustee appointed to manage the trust after the grantor’s death is considered a fiduciary. In other words, they have a moral and legal obligation to act in the trust’s best interest. If a trustee is negligent, self-serving, or otherwise incompetent, they could breach their “fiduciary duty” and be subject to removal.
A trust contest could remove a trustee if the trustee has breached their fiduciary duty by:
- Failing to properly manage the trust’s assets
- Failing to protect the trust’s interests
- Misusing the trust’s assets to better themselves or their loved ones
Trustees have other obligations that go beyond the administration of the trust—they must keep a detailed accounting of the trust’s expenses and actions and provide records to beneficiaries upon request.
When trustees fail to fulfill their duties, whether by creating a conflict of interest or depriving an heir of a deserved inheritance, they could be removed from their position by the court.
Contact an Experienced Probate Litigation Attorney Today
If you believe that the execution of an invalid trust or a trustee’s misconduct has deprived you of your right to inherit a Florida business, please send DeLoach Hofstra & Cavonis, PA, a message online or call us at 727-397-5571 to speak to an attorney and schedule your initial consultation as soon as possible.