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It is not uncommon for trusts to become the subject of disputes. Trustees may have disagreements with beneficiaries or other interested parties about how they should be managed or what distributions should be made. In some cases, these disputes can lead to litigation.
There are several common causes of trust disputes. One is a disagreement about the terms of the trust itself. For example, beneficiaries may dispute the interpretation of a provision in the trust document that is unclear or ambiguous. Another common cause of trust disputes is disagreements about the trustee’s actions or decisions. Beneficiaries may feel that the trustee needs to follow the terms of the trust or act in their best interests. Finally, trusts may also become embroiled in disputes between family members or other interested parties with different ideas about managing the trust.
The following are some common causes of trust disputes:
1. Disagreements about the terms of the trust: Beneficiaries may dispute the interpretation of a provision in the trust document that is unclear or ambiguous.
2. Disagreements about the trustee’s actions or decisions: Beneficiaries may feel that the trustee is not following the trust terms or acting in their best interests.
3. Family member disagreements: Trusts may become embroiled in disputes between family members or other interested parties who have different ideas about how the trust should be managed. Sometimes a sibling will be awarded deciding how to distribute their parent’s estate. Although this is usually met with the best intentions, siblings sometimes have different ideas on who should get what or how much should go to each individual. Parents can solve this common issue by utilizing an attorney to write down a plan and preferences of the children beforehand to try to minimize problems down the road. Another common issue can be when remarriage occurs. Generally, children assume they will be the beneficiaries of a trust or will when their parents die. When a parent is remarried, however, that is not the case. Talking to your children and spouse beforehand can help communicate who gets what and ensure both parties feel compensated.
4. Creditor claims: In some cases, creditors may attempt to collect on debts the trust or its beneficiaries owe. Creditors may try to reach assets placed into a revocable living trust. A revocable living trust is generally not protected from creditors. Once someone has passed, however, and a beneficiary is involved, the terms can change, and creditors will not have the same access to the trust.
5. Fraud or mismanagement: In rare cases, trusts may be the subject of fraud or mismanagement allegations. Common ways a trustee can breach their trust obligations include borrowing trust money for personal use, especially outside of the trust’s terms, charging unusual amounts of money for trust administration, failing to keep accurate or complete records, etc. Trustees have stringent rules, but fraud and mismanagement occur more often than you think.
6. Tax issues: Trusts may also become embroiled in disputes over taxes owed by the IRS or state tax authorities. People will sometimes use a trust to avoid taxes
If you are involved in a trust dispute, it is important to seek experienced legal help as soon as possible. An attorney can help you understand your rights and options and represent you in any litigation.