Trust litigation involves disputes about a trust’s management or distribution, and it tends to occur between beneficiaries and trustees.
If you find yourself dealing with a dispute, it can be stressful and make you worry about financial losses, broken relationships with the other party, and turmoil.
There are important things to know and do if you’re dealing with trust litigation, which we outline in the rest of this article. We’ll look at:
- Common types of trust litigation
- How parties can resolve trust litigation
- What happens when trust disputes go to court
- Possible outcomes of trust litigation
- What to do if you suspect trust mismanagement
- Why you should hire a lawyer
What are Common Types of Trust Litigation?
Trust litigation usually arises due to the following:
- Breach of fiduciary duty. If a trustee is behaving in a way that involves not fulfilling their duties correctly, such as by not having clear financial records, this can cause arguments and resentment.
- Trust validity. If there are suspicions of fraud or lack of capacity, this can make the trust not seem legitimate.
- Beneficiary arguments. Parties might argue over various aspects of the trust, such as how money is being transferred or distributed. A lack of clarity can sometimes be at the heart of these disputes.
- Removal of trustee. Beneficiaries might decide to remove a trustee if they feel they are not fulfilling their obligations, which can cause disputes and uncertainty about the future.
- Misinterpretation of duties or contracts. If people have conflicting ideas, this can lead to arguments.
How Can Parties Resolve Trust Litigation?
When parties are involved in a dispute, alternative dispute-resolution methods are usually the go-to solutions to maintain trustee-beneficiary relationships and prevent court time. These involve negotiation, mediation, and arbitration.
Negotiation involves informal talks between disputing parties so that they can reach a compromise and find a way to resolve their issues. If this isn't possible, mediation is the next step. Hiring a third-party, neutral mediator to be present during negotiations can help to keep conversations on track and civil, while encouraging parties to come up with resolutions together.
Arbitration is something worth considering if negotiation and mediation haven’t been successful. It involves hiring a neutral, third-party arbitrator who will listen to both parties’ cases and then deliver a final, usually legally-binding, resolution to the dispute.
What Happens When Trust Litigation Goes to Court?
If trust disputes can’t be settled via alternative dispute resolution, they will have to go to court. This usually involves the following:
- One party will file a petition or complaint against the other party. The petition should include reasons for the dispute, what parties are involved, and what relief is desired.
- The receiving party will respond to the allegations or try to challenge them.
- If the case goes ahead, there will be a discovery phase enabling parties to exchange case information and review documentation related to the issue. This can help to settle the case outside of court because parties might reveal new information.
- There is an option for parties to reach an agreement before a judge is involved in making a final ruling on the case.
- Here, meditation is recommended if it wasn’t previously attempted.
- If parties can’t reach an agreement, the case will go to a hearing or trial so a court will rule on an outcome. During a trial, parties get to present their evidence and the judge will review it before providing a final resolution to end the dispute.
What are the Possible Outcomes of Trust Litigation?
Trust litigation that lands you in court is usually as a result of trustee breach of fiduciary or statutory obligations. It can result in various outcomes, such as:
- Compensation for losses because of the breach.
- Remedy of tracing, which is when the court orders that an asset a trustee doesn’t dispose of correctly is given to the beneficiary.
- Creating a new trust to resolve the breach.
What Should You Do if You Suspect Trust Mismanagement?
If you suspect that the trust is being mismanaged, you should take prompt action.
Remember Your Beneficiary Rights
Your beneficiary rights include the following, which can help you to strengthen your case during trust litigation.
- You have the right to have accurate, regular financial and asset reports. A trustee is legally obligated to provide reports of all trust activities, such as expenses and investments.
- You have the right to have access to all the trust documents.
You can use these rights if you suspect trustee mismanagement as they will help you to investigate how the trust is being managed.
Review Documentation
You should go through all the trust documents to review the trustee’s duties and obligations, so you can see if they have not been fulfilling them to a high standard.
Check for Red Flags
If you notice any of the following signs, they point to mismanagement of the trust.
- Unexplained transfers of funds.
- Delayed or a lack of financial reports.
- Answering in a vague way when asked questions about the trust.
- Spending habits that aren’t in the trust’s best interests.
Keep a Record of all Communication
You should collect as much information as you can when interacting with the trustee so that you have proof of wrongdoing. Make notes of suspicious activity, such as delays or lack of transparency. This can help you if you need to pursue legal action.
Why Should You Hire a Lawyer for Trust Litigation?
A lawyer can help you to navigate trust disputes and litigation so that you get a favorable outcome. Although finding the best lawyer can be challenging, the process is easy on ContractsCounsel, an online legal network where clients connect with vetted lawyers. Here is how they will help you during trust litigation:
- They will evaluate your claims to see if you have enough grounds and evidence.
- They will help you explore your options so you choose the best legal strategy for your specific case.
- They will represent you during mediation and arbitration, as well as in court.
- They will help you negotiate with the other party to reach a favorable settlement.
- They will review all trust documentation for any red flags and to explain complex legal language.
- They will assist you in collecting appropriate evidence to support your case.
Are you looking for an experienced, trusted lawyer for trust litigation?
Hire a lawyer on ContractsCounsel. All lawyers are vetted on the platform. They have the expertise and experience to assist you in building a case and giving you peace of mind that they will support your interests, while minimizing your financial risks.
