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Common Types of Disputes Involving Complex Trusts

February 12, 2020

Often, disappointment over how a will is drawn or distributed to heirs is cause for disputes in complex trusts. Trust administration includes navigating sensitive family dynamics, further complicating resolution of disputes.  The disappointed heirs may not be able to resolve conflict with the administrators or other beneficiaries resulting in litigation. In fact, a large portion of probate matters are related to disputes involving trusts. It is helpful to divide trust-related disputes into two broad categories. One type involves disagreement with how the trust is set up, while another type involves how the trust is administered.

When conflicts are related to how a trust is set up, they are usually based on an heir questioning the validity of a trust. To create a valid trust, certain legal requirements need to be met. Often, litigation involves claims that the trust did not fulfill legal requirements. These can be proven when evidence shows the following:

Lack of Capacity

When a grantor creates a trust, the grantor must have the mental capacity to understand the scope of what is being created. That means the grantor must be of sound mind. Often, lack of capacity is shown through medical evidence of the mental ailment that prevented the grantor from understanding the scope the trust.

Undue Influence

Another requirement is that the grantor should not have been subject to undue influence. Heirs may dispute a trust because caretakers and others may have influenced the grantor to distribute trust funds unfairly. They must show evidence of coercion or other pressure exerted on the grantor so that a disproportionate amount of their estate is bequeathed to them.

Fraud

Heirs may also claim that fraud was involved in creating the trust. Fraud claims assert that the signature on the trust is not valid or that the trust or will involved is an alternate, fraudulent one while another one is valid. Another category of trust-related disputes involve how the trust is administered. These types of disputes are the most common probate-related matters. These disputes do not question the validity of the trust, but question whether the executor of the trust breached fiduciary duties or mismanaged the trust fund.

A trustee is considered a fiduciary, which means they should act in the best interest of the trust and its beneficiaries. The duty entails that the trustee follows the directives of the trust and manages the trust property. Failure to follow fiduciary responsibilities can be a source of trustee liability. Claims against trustees involve the following:

Breach of Fiduciary Duties. As a fiduciary, the trustee cannot use the trust’s assets for personal gain or use the position as trustee for a personal advantage.

Failure to Follow Trust Directives.  A trustee must follow the directives of the grantor as laid out in the trust documents. Therefore, a trustee is not free to distribute funds in any manner or modify the trust.

Mismanagement of funds. A trustee should ensure that the trust funds are maintained properly. Therefore, the trustee cannot mishandle the funds, waste them or invest poorly so that the trust loses its value.

Commingling of Funds. A trustee should maintain proper records and accounting of the fund’s expenses and distribution. Also, a trustee should never commingle personal accounts with the trust accounts.

Disputes. Trust-related disputes involve complex legal issues, as well as sensitive family matters. Emotions can run high, making it hard to resolve disputes amicably.

Philadelphia Business Lawyers at the Harty Law Group Handle Complex Trust-Related Litigation

If you have concerns involving complex trusts, contact the Philadelphia business lawyers at the Harty Law Group. Our attorneys will handle your trust-related claims with sensitivity. We know each family is different and handling distribution of trusts can be emotionally charged. For an initial consultation, contact us online or call us at 267-262-5650. Located in Philadelphia and Haddonfield, New Jersey, we serve clients throughout Pennsylvania and New Jersey.

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