Trust Litigation

Trust Litigation

Trusts provide families with excellent tools to protect their legacy. Because of this, families implement trusts to strengthen their estate plans.  These trusts can include safeguards for beneficiaries such as spouses, children, and grandchildren. However, sometimes courts must enforce trust agreements. As a result, parties may need to file lawsuits involving trusts, trustees, and beneficiaries to protect their rights and responsibilities.

Parties create trusts for different reasons. For example, probate court costs create incentives for trusts. Other situations include a desire to control how the money in the trust handled after death. This can protect children from creditors or even from themselves if they are poor at handling money. Regardless of the reasons for creating a trust, a lawsuit may occur at some point of the process.

Resolving Disputes

One of the reasons families create trusts is to provide additional privacy for their family. In these situations, they may not desire litigation and the public scrutiny it creates. Often, these trusts require other forms of dispute resolution beyond litigation. This may include mediation requirements. However, mediation does not prevent you from hiring an attorney to assist you in this process. We represent individuals finding themselves in mediation or another form of dispute resolution involving trusts.

Creditors of Beneficiaries

A trust can restrict family members from complete access to funds. When this occurs, trusts are often insulated against claims from creditors of beneficiaries. However, creditors may still try to go after trust assets. When this occurs, the trust should hire lawyers that can protect against these claims in court and assert defenses. If trusts fail to appear in court, the creditors automatically win.

Trust Validity

Not everyone appreciates a well-executed trust. This can include beneficiaries who desire full access to funds in a trust or even family members not in the trust. For example, the validity of the trust may be challenged by those seeking to increase the size of the probate estate such as surviving spouses from second marriages. Grounds for declaring a trust invalid often come from problems in the trust’s execution, the effectiveness of language in the trust, and clauses.

Interference with Inheritance

One of the biggest problems with trusts come from lack of funding. A trust is useless if it is not funded with money or property. In some situations, people may intentionally prevent family members from funding a trust for other beneficiaries. When this occurs, injured parties may sue for interference with the inheritance. These lawsuits affect not only the trust but also the estates of the loved ones creating the trust.

Breach of Fiduciary Duty

Trustees must take their job seriously and solemnly. Courts hold trustees to a high standard of care. People often formally refer to this standard as their fiduciary duty. Because of this duty, trustees must act in the best interest of the trust’s beneficiaries in a manner consistent with the language of the trust. Trustees in Ohio must act impartially, in good faith, and as a prudent person. This means a trustee shall exercise reasonable care, skill, and caution with trust assets.

Sometimes, through self-dealing or mismanagement, trustees breach this duty. When this occurs, beneficiaries have a right to sue the trustee under Ohio law for breaching this duty.

Trustee and Beneficiary Disputes

Sometimes, beneficiaries disagree with trustees in manners not rising to breaches of fiduciary duty. When this occurs, courts will hear disputes involving several issues. Trustees could find themselves in conflicts of interest that they cannot resolve without removal from the trust. In other circumstances, beneficiaries could challenge the manners in which a trustee makes investments.

Language is imperfect sometimes. In some instances, parties may interpret clauses in the trust differently. Poorly written or ambiguous trusts create problems when it comes to actions by the trustee and the rights of beneficiaries. A dispute involving the language in the trust may require litigation if the parties cannot reach a resolution. These situations can involve well-intentioned family members seeking a formal ruling on how the trust must interpret a clause.

Disputes Between Trustees

A trust sometimes employs co-trustees. When this occurs, the trustees may act independently or may require agreement before they take action. When a disagreement arises between trustees, the dispute may bleed over into a courtroom. Litigation between trustees not only affects how the trust is administered but also sometimes the livelihood of the beneficiaries. When this occurs, the trustees must always keep in mind the duty owed to beneficiaries in resolving these disputes.

Removal of Trustees

A well-crafted trust should have clear language on changing a trustee without the need of a court. However, sometimes this succession plan hits a snag due to an unexpected death or change involving trustee candidates. Other situations involve trustees unwilling to step aside or unable to competently act due to illness. When this occurs, courts may need to appoint successor trustees. Trusts and beneficiaries may hire lawyers to assist them in drafting requests for courts to appoint successor trustees.

Violations of Trust Agreement

Trusts agreements are long written documents. Unfortunately, lawyers must sometimes write trusts using complex language to get the desired result. Because of this, people may unintentionally violate the rules of the trust. In other situations, people simply violate terms of a trust because they want to. Regardless of the situation, improperly administering a trust can lead to disastrous results. Violating a trust can cause everyone to pay unnecessary taxes. It can lead to Medicaid recovering against a trust. In some cases, it can render the trust useless against what it was created to protect. If someone is violating a trust agreement, it is wise to contact a lawyer and review existing options.