Why Trusts End Up in Court (And How to Avoid It)
Trusts are powerful estate planning tools designed to help avoid probate, reduce taxes, and provide privacy and control over the distribution of assets. A trust should help streamline the estate process and help prevent court involvement when created and managed correctly. But unfortunately, that’s not always the case. Despite best intentions, some trusts still end up in court—and when they do, it can lead to costly legal battles, damaged relationships, and delayed distributions.
So, why do trusts end up in court? Let’s explore the most common reasons and how you can help avoid these issues.
1. Poor Drafting or Ambiguity
One of the top reasons trusts land in court is due to unclear or poorly drafted language. If the terms of the trust are vague, contradictory, or open to interpretation, beneficiaries may challenge them, leading to litigation.
How to avoid it: Work with an experienced estate planning attorney who understands the nuances of California trust law. A clear, well-drafted trust can reduce confusion and help ensure your wishes are carried out as intended.
2. Disputes Between Beneficiaries
Family dynamics can be complex. Inheritances sometimes bring out the worst in people, especially when money, property, or long-standing tensions are involved. Sibling rivalries or perceived favoritism can spark disputes that end up in court.
How to avoid it: Transparency and communication can be key. Discuss your plans with your loved ones when appropriate, and consider using a neutral third party—such as a professional trustee – to administer the trust.
3. Breach of Fiduciary Duty
The trustee of a trust has a legal obligation to act in the best interest of the beneficiaries and to follow the terms of the trust. If a trustee mismanages assets, makes poor financial decisions, or acts in self-interest, beneficiaries can sue for breach of fiduciary duty.
How to avoid it: Choose your trustee carefully. While it may be tempting to appoint a family member, not everyone is equipped to handle the responsibility. Consider naming a professional fiduciary or a trust company for added peace of mind.
4. Undue Influence or Lack of Capacity
If someone believes the grantor was not of sound mind when creating the trust—or was pressured or manipulated by someone else—they may contest the trust in court.
How to avoid it: If there’s any concern about capacity or influence, make sure the trust is created with the help of a licensed attorney. Document the process and, when necessary, obtain a medical evaluation to confirm mental capacity.
5. Failure to Fund the Trust
A trust is only effective if it is properly funded. If the trust creator fails to transfer assets into the trust, those assets may go through probate – which can defeat the very purpose of creating the trust in the first place.
How to avoid it: After creating a trust, take the necessary steps to re-title assets in the name of the trust. Your attorney can guide you through this critical process.
At Cannon Legal Firm, we help families create, manage, and defend trusts with confidence. If you’re concerned about the integrity of a trust – or want to make sure yours is solid, schedule a no obligation, no cost consultation with Attorney Dana Cannon of Cannon Legal Firm. Protect your legacy and your loved ones by getting it right the first time.