A trust is a legal tool that gives the creator the ability to have greater control over the distribution of their assets. The exact control varies depending on the language of the trust. The creator can set it up to give beneficiaries funds specifically for college education, to help cover the cost of a down payment on a home or, with a special needs trust, to provide financial assistance without impacting eligibility to receive other benefits.
A trustee manages a trust for the benefit of its beneficiaries. There are instances when beneficiaries may be concerned the trustee has made a mistake or otherwise not properly managed the trust. This can lead to allegations of wrongdoing and potential litigation. When a beneficiary has these concerns over the management of a trust, a lawsuit can ensue.
When can a beneficiary sue a trust?
The most common issue that can result in litigation involves allegations of a breach of fiduciary duty. A fiduciary duty is the trustee’s legal responsibility to act in a way that benefits the trust. If there are concerns that the trustee is not meeting this duty, the beneficiary may use a lawsuit to hold the trustee responsible for mismanagement of the trust. Courts often require the beneficiary establish unethical behavior that led to the trustee’s own financial profit, such as self-dealing, to move forward with a case.
Common examples of misbehavior that can trigger concerns of a breach of fiduciary duty include concerns the trustee is treating some beneficiaries better than others, investing in ways that are personally beneficial or withholding assets without a reasonable explanation to the beneficiaries.
Are there other ways to question a trust?
It is also possible that the trust itself is invalid. A beneficiary may believe the creator did not act of their own free will in the creation of the trust, that they were coerced into the creation of the trust. Another common way beneficiaries contest a trust is to allege fraud. This option involves the belief that the creator did not actually create the trust, but instead someone else fraudulently signed the documents.
Those who have concerns of mismanagement, a breach of fiduciary duty or a fraudulent trust are wise to seek legal counsel to discuss their options.