Before you decide to challenge a living trust, you must first establish legal standing to do so. As a general rule, only those with a financial or legal interest in the outcome of a challenge may petition the court for relief. Petitions to challenge a living trust are filed either in probate, chancery or general trial court, depending upon the jurisdiction. The person who executed the trust is known as the grantor; the parties responsible for maintaining the trust are known as trustees; and the individuals or entities who are to inherit the trust property are the beneficiaries. Both trustees and beneficiaries have standing to challenge a living trust and, in some situations, may do so even before the death of the grantor.
Definition of a Living Trust
A living trust is also known as an inter vivos trust. As the name suggests, the trust is created and effective during the lifetime of the grantor. Most living trusts are revocable in nature and can be changed or terminated whenever the grantor decides. An irrevocable living trust is one which cannot be amended and is permanently in place when executed. The living trust document must be signed by the grantors and trustees. The grantor must also make arrangements to transfer property into the name of the trust either through a deed or title transfer.
If you believe the grantor was not mentally competent when he executed the trust, you might be able to challenge the trust on competency grounds. To do this, you must submit evidence to suggest the grantor was suffering some sort of mental defect at the time the document was executed. This could be in the form of a physician’s affidavit or through medical records detailing the existence of a mental issue at the same time the living trust was created. Most states maintain a list of factors that must be met in order to win this type of challenge. For instance, you may be required to prove the grantor did not understand the nature or amount of his assets, could not independently identify his beneficiaries, or does not understand the consequences of placing property into a trust.
One of the most common and unfortunate scenarios surrounding estate planning involves undue influence by unscrupulous family members or acquaintances resulting in the grantor creating or changing his living trust. To win your challenge based on undue influence, you must prove several elements. First, you must show the grantor was susceptible to the influence of others. This could mean the grantor had a mental defect or was in a vulnerable position with regard to the defendant. Second, you must prove the defendant had a motive or opportunity to exert undue influence over the grantor. You might meet this element by proving the defendant was aware the grantor had significant wealth or was in constant interaction with the grantor. Lastly, after meeting the initial criteria, you must show that the defendant actually exerted undue influence that resulted in the creation of a living will to benefit the defendant, or in the creation of an amendment to an existing living will naming the defendant as a beneficiary.
Breach of Fiduciary Duty
If you are a beneficiary to a living will, a co-trustee or even a grantor, you can challenge a living will based on a breach of fiduciary duty by a current trustee. Trustees are required to maintain a duty of loyalty, candor and good faith when managing the trust assets. If a trustee is not handling funds properly, a challenge may be appropriate. To succeed, you will need solid evidence that the trustee is stealing money or otherwise mismanaging trust assets, which could require the services of a forensic accountant.
Stephanie Reid has been writing professionally since 2007, with work published in the Virginia Bar Association's "Family Law Quarterly" and the "Whittier Journal of Child and Family Advocacy." She received her Juris Doctor from Regent University and her Bachelor of Arts in French and child development from Florida State University. Reid is admitted to practice law in Delaware and Maryland.