A trust is a fiduciary relationship in which one party holds legal title to property for the benefit of certain individuals. A trust is created 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 the trust is formed, the appointed trustee has a fiduciary duty to act in the trust’s best interest and its recipients (i.e., the “beneficiaries”). One of the most common reasons why trusts are created is to ensure the safekeeping of assets or property for the benefit of another person or party.
What is a Trust Property Dispute?
As previously mentioned, setting up a trust is a common method that people use to distribute both personal and real property. In a trust, the property is first transferred to a designated trustee, who then holds the property or assets “in trust” for a specified amount of time before transferring it to the intended beneficiary.
A trust dispute may arise where there are disagreements regarding the distribution of property as listed in a trust.
In general, trust disputes involving property typically occur because certain conditions are usually attached to how the property might be distributed. For instance, the trust creator may include instructions that the property is to be held in trust until the beneficiary reaches the legal age of inheritance (usually 18 years old).
The more complex the conditions attached to the trust, the more likely it is that a legal dispute will arise over how the property is distributed.
What Are Some Common Types of Trust Disputes Involving Property?
There are many different kinds of disputes when dealing with trusts. Some conflicts concern the construction of a trust, while others relate to how the contents of trusts are administered. The latter is the type that usually involves trust disputes strictly relating to property.
Some common examples of trust disputes regarding property might include:
- Disputes as to which beneficiary is supposed to receive the property;
- Property distributions that are illegal or specifically against trust laws;
- Disputes over the timing of a property transfer;
- Conflicts about either the amount or value of the property involved; and
- Disputes regarding the trustee’s management of the property or assets, such as if the trustee sold or distributed the property in violation of the terms of the trust.
Generally speaking, trust disputes involving property are most commonly found with family trusts. One possible reason for this may be the kinds of interests involved. These can include savings accounts, jewelry, vacation homes, and so forth, which can give rise to conflicts among the beneficiaries of the family trust.
The contents of a family trust can include cash accounts and certain types of investment accounts. Therefore, the trust property dispute will sometimes involve not only real or personal property but also monetary amounts (e.g., bank account contents).
How are Trust Disputes Over Property Typically Handled?
Trust disputes over property are typically resolved by having a court review the actual trust document. In most cases, a judge will attempt to refer to the initial trust document as much as possible. This is so that the original intentions of the creator of the trust are honored and ensure that the property dispute is properly settled.
This is one of the reasons why it is extremely important to make sure that the terms of a trust are drafted in a very clear and unambiguous manner. An estate attorney can assist in drafting a trust that meets these requirements.
If using the actual trust document does not help to resolve the matter, a court may look to several other factors, such as:
- Any prior distributions of the property conducted between the beneficiary and the creator of the trust;
- The actions and conduct of the parties involved (basically, the court will try to interpret the intentions of the parties through their behavior); and
- Review various documents for relevant evidence (including but not limited to receipts, personal letters, or electronic documents).
As far as remedies go, a trust dispute can result in large damages awards for the plaintiff. Additionally, a court may issue an order that requires the property to be transferred in a certain way.
What Are Some of the Remedies for Trust Disputes?
There are many different remedies intended to resolve trust disputes. Some of these resolutions are only available according to the laws of each state, while other conflicts can be resolved by the trust’s beneficiaries coming to a majority vote.
More serious disputes may need to be resolved in court or using an Alternative Dispute Resolution (“ADR”) method. ADR is frequently recommended as an option for resolving trust disputes, as it works to avoid litigation. In ADR, the disputing parties agree to be bound by the decision of an independent and impartial third party. These conferences generally encourage parties to settle their dispute without going to trial; as such, ADR is generally less formal, less expensive, and less time-consuming than litigating the dispute.
Disputes involving a trustee’s mismanagement of trusts are often resolved by first removing the trustee from their position. The trustor then selects a replacement to become the new trustee. Alternatively, a judge may order a constructive trust. A constructive trust can counteract the trustee’s initial mismanagement of the trust. Additionally, suppose a court finds that a trustee used assets from the trust for their benefit. In that case, the trustee may be held liable and be ordered to reimburse the beneficiaries fully.
Finally, if a judge finds that a trust was formed under duress or fraud, the court may decide to fully or partially void the trust. The same could apply if the trustor did not have the legal capacity to create the trust being disputed.
Should I Hire a Lawyer for a Trust Dispute Involving Property Issues?
Trust property disputes can pose potential challenges for a variety of reasons. They sometimes involve fairly technical legal issues and terminology, which can make resolving a dispute quite complicated.
In addition, these matters can become even more stressful and confusing when it is connected to an emotional element, such as conflicts over property or assets being held in a family trust.
If you need assistance with filing a legal claim involving a trust property issue, you should strongly consider hiring a local probate attorney with experience with trust and estate laws.
An attorney who is both qualified and located in your area will be able to guide the particular trust laws that are applied in your state. They can also be readily available to help you file your paperwork, negotiate on your behalf during settlement agreements, and, if necessary, provide you with representation in court.
Finally, it might be in your best interest to contact an attorney before a trust dispute even arises. Whether you are the trustor, trustee, or a beneficiary of the trust, an attorney can help you draft and review the terms of a trust document to ensure that it is fair and legally enforceable. Use LegalMatch to find a local estate attorney today. There is no fee to schedule a consultation.