A trust is a fiduciary relationship in which one party holds legal title to property for the benefit of certain individuals. Essentially, a trust occurs when an individual (the “trustor” or “settlor”) creates a legal relationship by giving another individual (the “trustee”) control over their property or assets for the benefit of a third party known as a “beneficiary.”
Once a trust has been formed, the trustee has a fiduciary duty to act in the best interest of the trust and its recipients (i.e., the “beneficiaries”). This is one of the most common reasons why trusts are created: to ensure the safekeeping of some sort of property for the benefit of another person or party.
There are many different types of trusts, such as a testamentary trust, a charitable trust, and a discretionary trust. Although each form of trust involves separate procedures for both their creation as well as the responsibilities of the trustee.There are certain basic elements that all trusts must have in order to be considered valid.
In general, a valid trust typically requires the following:
- The trustor (settlor) has legal capacity (i.e., mental fitness) and a present intent to create not only the trust itself, but also the relationship with the trustee;
- The property held within the trust must be identifiable (e.g., by a description or is readily apparent from the property or asset itself);
- The trustor must name a trustee and either specifically identify the beneficiaries, or at least describe how the beneficiaries will be determined; and
- There must be a valid purpose for forming the trust (e.g., any purpose that is not illegal, impossible, or contrary to public policy).
These are only some of the requirements that are necessary for creating a trust; however, trust laws may vary by state.
As such, whether you are deciding to form a trust, have questions about one, or are involved in a trust dispute, you should contact a local estate attorney. They can provide further information regarding how the laws in your state may affect a claim.
There are two types of disputes that commonly arise in regard to trusts. The first is usually because the beneficiaries disagree over the construction of the trust. The second is usually due to how the trustee is handling and administering the property or assets assigned to the trust.
Some other issues that may occur include:
- Whether the trustor had legal capacity (i.e., fit mind) to create the trust;
- Whether the trustor was pressured or coerced to form the trust (e.g., undue influence);
- Whether the trustor was affected by fraud, or if the signature was forged.
As mentioned above, the most common trust disputes usually involve the mismanagement of the trust by the trustee. For example, the trustee may have failed to provide accurate accounting records of the assets and property held in the trust, or improperly divided and distributed the property or assets to the beneficiaries.
Additionally, if the trustee mixed their personal assets with the property that was in the trust, or did not follow the exact instructions provided by the trustor for managing the trust, then their actions will most likely cause a variety of issues and disputes to result.
While some disputes regarding trusts may be minor, many others present very complex legal issues. Therefore, consulting an attorney either at the beginning stages of creating a trust, or immediately after a dispute concerning a trust arises, is highly recommended.
There are several remedies that exist to resolve trust disputes. Some of these may depend on and vary according to the laws of each state, while other conflicts may only pose minor issues that can be resolved by the beneficiaries coming to a majority vote.
More serious disputes, however, may need to be resolved in court, or by using an Alternative Dispute Resolution (ADR) method. ADR is frequently recommended as an option for resolving trust disputes.
Remedies for disputes regarding a trustee’s mismanagement of a trust are often solved by first removing the trustee, and then by having the trustor select a replacement to become the new trustee.
Alternatively, a judge may order a constructive trust, which can counteract the trustee’s initial mismanagement of the trust in question.
Additionally, if a court finds that a trustee used assets from the trust for their own personal benefit, then they may be held liable for and be ordered to fully reimburse the beneficiaries.
Finally, if a judge finds that a trust was formed under duress or fraud, or if the trustor did not have the legal capacity to create it, then the court may decide to fully or partially void the trust.
If you are involved in a trust dispute and are unsure of which method to use to resolve your case, you should speak to an estate attorney. They will be able to assist you in deciding the best way to settle the matter.
Disputes over trusts often involve very complicated legal matters and thus, can present quite a challenge to navigate them efficiently. Therefore, you should strongly consider contacting an estate attorney who is highly experienced in laws concerning trusts.
In addition to hiring an estate attorney who specializes in trusts, they should also be local to your area. Many times, disputes are resolved using the laws of the state in which it is occurring.
Finally, an attorney can provide information about what the best available options are for your case, as well as represent you in court on the matter, or during an ADR procedure.