What Happens When a Living Trust Is Contested?

Disputes among heirs trigger problems with a family trust.
i Comstock/Comstock/Getty Images

A living trust holds ownership of your property and assets, which get distributed to your heirs or beneficiaries after you die or become incapacitated, according to your instructions when setting up a trust. A living trust, also called a revocable living trust or family trust, gives your family privacy, avoiding the court process of probate to distribute assets. Despite your best intentions, someone can contest the trust if a suspicion of fraud, errors or coercion arises.

Trust Process Continues

Anyone contesting a trust needs to file lawsuits against each of the beneficiaries. Contesting a living trust is usually more difficult than invalidating a will. For example, someone contesting your will might try to prove you signed it under duress or when you were mentally incompetent. A trust is already in effect, so a person would have to prove the trust has been invalid ever since the day the trust agreement was signed. The living trust also stands up to its name when someone contests it. Asset distributions continue for beneficiaries pending the outcome of the claim. With a contested will, assets become frozen and can’t be moved until the parties reach a resolution.

Reasons for Contesting

Claims against an invalid trust include charges of fraud, such as an heir lying to you about other heirs to exclude them from the trust. You could have made mistakes in the wording of the trust. The person might charge you were under duress when signing the trust agreement, or that undue influence was used in coercing you to arrange or sign the agreement.

Unforeseen Situations

Sometimes contesting a living trust involves unexpected changes that occurred since the trust was put into effect. A marriage or children could alter the number of beneficiaries who should have been included in the trust, depending on what you intended. Maybe you didn't think to include additional family members in the future. The court could allow amending the trust if it concludes the changes fit in with your original intentions. Contesting a living trust could also occur before your death if someone is trying to prove you have become incapacitated since setting up the trust.

Decisions Vary

If the court rules the living trust is valid, the trustee who manages the trust continues distributions of assets in the normal manner. A variety of results could happen if the court rules the trust invalid, depending on the claims. The court could rule the trust is not valid in whole or in part. An aggrieved party might be rewarded with certain assets from the trust or beneficiaries might reach a settlement with the party. Further lawsuits could result from an invalid trust.

the nest