A trust is a form of legal organization through which individuals, businesses, non-profit corporations and an array of other entities can accomplish an array of goals. In many scenarios, a trust is utilized as part of a comprehensive estate plan. The individual may elect to utilize a trust over more traditional estate planning options, such as a will, for a variety of reasons but a common one is to protect the privacy of all involved parties and the confidentiality of the transaction. In other scenarios, the individual might utilize a trust such as a Qualified Terminable Interest Property (QTIP) or Grantor Retained Annuity Trust (GRAT) to plan and provide for the future.
However, the above captures only one scenario where the use of a trust might be appropriate. Trusts may also be utilized for tax and other purposes. For example, a trustee may consider a Charitable Remainder Trust (CRT) and its tax treatment to achieve beneficial treatment and removal of taxable assets from the estate. Other uses of revocable or irrevocable trusts may include providing life insurance benefits, for a special needs relative, or other purposes. Once again, trusts are complex and flexible legal tools and these scenarios only address some of the more straightforward potential uses by individuals and businesses.
Attorney William S. Heyman has more than 20 years of experience handling litigated fiduciary disputes and trust challenges. If you are concerned about trust litigation, misappropriation of trust funds, breach of fiduciary duty, a trust challenge, or other concerns Mr. Heyman may be able to assist. To schedule a confidential consultation at the Heyman Firm, call (410) 305-9287 or contact the firm online.
Typical Challenges to the Trust Plan
Depending on the intent and purpose for the trust, a number of common challenges should be anticipated. Careful planning can increase the likelihood that any challenge to the trust will fail and your intent and goals will be protected. For a moment, let us consider an estate plan that predominately makes use of a trust to achieve the grantor’s personal, financial, and legal goals.
In this type of scenario, challenges to the trust are typically brought when a friend, relative, or close associate of the trust grantor feels that they were treated unfairly under the terms of the trust. It is important to note that the individual does not have to be fully disinherited to challenge a trust. He or she merely has to feel that the treatment received was unfair or inequitable. In many cases, challenges like this can effectively be handled by a no-contest clause, but in its absence, potential challenges may include:
- Lack of capacity on the part of the grantor
- The trust grantor acted due to fraud, duress, or undue influence
Working with an experienced and prudent attorney can minimize the risk of challenges on these grounds. However, if you or your attorney did not take action to minimize the potential for these possibilities – such as speaking to the grantor about his or her wishes without a third party present – you open the door to potential litigation.
Common Areas of Trust Litigation
Since trusts are extremely flexible tools that can accomplish an array of legal and financial goals, an array of potential grounds for trust litigation exist. These grounds include:
- Wrongful Acquisition of Trust Assets or Misappropriation of Trust Assets Claims – Actions of this type often set up for complex disputes among family members, investors, or other parties. Typically, a party with an interest in the trust begins to grow suspicious of the current or a former trustee due to luxury purchases and other fiduciary actions that appear wasteful, inequitable, or even a misappropriation of trust assets.
- Petition To Compel Return of Real Property To Trust, For Breach of Fiduciary Duty – A fiduciary duty means that the party must act in the best interests of the represented party. A fiduciary cannot use his or her position to enrich oneself or pursue alternative goals. Litigation of this type typically occurs following improper action by the trustee stemming from a conflict of interest or failure to exercise reasonable care may arise in a matter of this type.
- Petition for Instructions on the Interpretation of Trust Terms – In the case of a trust with less than clear terms, one or more parties may file to clarify the points of contention. Litigation of this type may focus on financial figures that do not add up, life estates that may conflict with other interests, and tax and insurance maintenance considerations.
The above captures only a few of the more common trust litigation scenarios. Generally, litigation is often motivated by unclear trust terms, potentially improper actions by the trustee, and by potential beneficiaries who believe they have unfairly been cut out of the trust arrangement.
Work with an Experienced and Strategic Trusts Litigator
For more than 20 years, Attorney William S. Heyman has provided trusted, and strategic litigation guidance. Mr. Heyman’s practice and team of lawyers has frequently addressed trust litigation and other fiduciary disputes. To schedule a confidential consultation at the Baltimore-based Heyman Law Firm, call the firm at (410) 305-9287.