Can a Living Trust Be Contested?
In TV dramas, there are enough scenes that show how family members and friends can challenge the terms of a will if they feel shortchanged or left out. But the question arises: Can someone likewise challenge the terms of a living trust?
The answer is yes, and the legal justifications for such a challenge are pretty much the same for both a will and a trust.
If you’re embarking on estate planning in or around Redlands, California, or getting ready to undertake a periodic review of what you have, contact The Elder & Disability Law Firm, APC. Our estate planning team has the knowledge and resources to advise you on how to create a comprehensive estate plan that will provide lasting peace of mine going forward for both you and your loved ones.
The Elder & Disability Law Firm, APC serves clients not only in the Redlands area, but also in the neighboring communities of Rancho Cucamonga, Riverside, and Palm Springs.
The Difference Between a Will and a Living Trust
A last will and testament and a living trust are two estate planning instruments that can be used to name beneficiaries and designate the assets they should receive once you are gone.
A will in and of itself has no power until the death of the grantor takes place and a probate court certifies the validity of the will. A living trust, in contrast, takes effect as soon as it is signed and witnessed, which is why it is called “living.” The trust itself immediately becomes the owner of all assets placed in it.
A will names a personal representative who, upon certification of the will by the probate court, will be named executor of the estate. This representative then oversees the management of the decedent’s assets and finally the distribution of those assets to the named beneficiaries.
A living trust designates a successor trustee. The settlor or grantor of the trust remains the trustee so long as he or she is alive and capable of managing everything. The successor trustee takes over only if asked to do so, or if the grantor becomes incapacitated, and, of course, when the original trustee passes away.
As noted, both a will and a trust name beneficiaries and designate the assets they should receive. The executor or trustee is then responsible for making sure those distributions happen according to the instructions in the governing legal document.
What Is a Living Trust?
A living trust is also known as a revocable trust, which means it can be canceled or amended at any time. An irrevocable trust, on the other hand, is set in legal concrete once it is created. It is permanent, and the trustee you name will have control of the assets you’ve placed in that trust from that point on.
A living or revocable trust is the most commonly used of the two types since it is much like a will in that it designates beneficiaries, as does an irrevocable trust, but is also flexible enough that, should you change your mind, you can alter the beneficiary designations and asset distributions as you see fit.
Unlike a will, however, a trust takes effect immediately. The trust, not you, now owns the assets you place in it. However, you still have control over the trust and its assets until you become incapacitated or pass away – or decide to simply let your successor trustee take over.
A living trust has several benefits over a last will and testament. Most importantly, it does not have to go through probate court, and as a result of that, there is no public record of the proceedings or of the details of the trust itself.
When it comes to settling the estate of the deceased, the process under a will and a trust are fairly similar. Notice must be given to beneficiaries and creditors. Debts and taxes must be paid, and all outstanding financial affairs wrapped up before the beneficiaries can receive their assets.
This similarity extends to disgruntled would-be beneficiaries who feel cheated or ignored and thus challenge the validity of the document – will or trust – in court. If a challenge is filed, then the probate court will be asked to adjudicate. This will take place in the county where the death took place.
Who Can Lodge a Contest Against a Trust?
For both a will and a trust, a person who wishes to challenge the validity of the document must have legal standing. According to California law, interested parties are allowed to challenge the terms of a will or a trust. Interested parties include spouses, children, heirs, beneficiaries, creditors, or anyone who has a claim against the assets in the trust.
In general, unless you are recognized as a beneficiary under the state’s laws of intestate succession, you will likely not have legal standing unless as a creditor or a party with a financial or other claims.
Grounds for Launching a Trust Contest
First off, if you qualify with legal standing to file a trust contest, you still must meet the state’s deadline for doing so. Generally speaking, you have 120 days to petition the probate court from the date you receive notice from the trustee that the settlor has passed away and the trust is being administered.
The legal grounds for challenging the validity of a trust are pretty much the same as those for challenging a will. Among these reasons are:
The Trust Creator Lacked the Requisite Mental Capacity
To prevail in this argument, you must go beyond just presenting a medical evaluation that the trustor was suffering from dementia or Alzheimer’s. California legal precedent requires that you show that the trustor failed to understand three things: the nature of the trust, that person’s relationship with heirs, and the nature and extent of their property (assets).
This often goes hand in hand with the lack-of-capacity approach. The allegation is that someone took advantage of the condition of the trustor when writing or amending the trust to force the trustor to unduly favor that person.
The Trust Language Is Ambiguous
This occurs when the document is so ambiguously composed and worded that several different interpretations can ensue, depending on who is reading the trust and where their personal interests lie.
Someone altered or outright forged the trust document.
No Contest Clauses
Some trusts, however, contain “no contest” clauses. While these clauses do not prevent court challenges, they do require that the challenge be launched with provable “probable cause.” If the probate court finds there is no probable cause for the challenge, the challenger may have to forfeit their receipt of assets from the trust.
If you are creating a living trust, you may well feel that the inclusion of a “no contest” clause will provide a needed safeguard. You should discuss the issue with your estate planning attorney.
Be forewarned about trust contests, however. If the probate court does rule in favor of the challenge and challenger, the court may order that the trust assets be distributed according to the rules of intestate succession. Either that, or the court may recognize a previous version of the trust as being valid.
Protecting the Future of Your Loved Ones
We at the Elder & Disability Law Firm, APC have extensive experience in helping clients create estate plans that utilize living trusts to circumvent the delays and hassles of probate court proceedings, while at the same time fully honoring your wishes for your family and loved ones.
If you’re in or around our service area in Redlands and surrounding communities, reach out today to start your comprehensive estate planning, or to review and update what you already have in place. We will listen to your needs and concerns for your loved one, and make sure your estate plan incorporates all your hopes and dreams for those you cherish.