What is Trust Litigation and What Should you Know About it?
A trust is a fiduciary arrangement that allows a person or entity to hold and control assets on behalf of another individual. When there is a disagreement between the trustee (the person in control of the assets) and the beneficiary (the person who ultimately benefits from the trust), a lawsuit may be filed. Generally, a trustee should seek legal advice from a trust administration lawyer to advise them regarding their duties, so that litigation can be avoided in the future. What is trust litigation and what should you know about it?
When an argument over the terms of the trust or the way the trust is being managed arises, the difference of opinion between the trustee and beneficiary can be settled through trust litigation. Sometimes a legal battle over a trust can be resolved through a settlement; other times the court will rule on the resolution of the dispute. There are many causes for trust litigation.
A trustee is responsible for managing the assets of the trust as a fiduciary, meaning they must act in the best interests of the beneficiary when making decision. While every trustee must act as a fiduciary, this does not mean every trustee must be an expert in financial management. The legal standard for the fiduciary role is that decisions must be in line with what a reasonable trustee would be expected to do when presented with the same decision. In order to fulfill these fiduciary obligations, a trustee may seek assistance from professionals for legal advice, tax preparation or investment advice. The fees for these services are generally paid for by the trust. This leads us to one of the most common reasons for trust litigation: the beneficiary feels that the trustee’s usage of the trust’s money was not appropriate. Maybe the beneficiary thinks the services were unnecessary, too expensive or did more to benefit the trustee than the beneficiary.
Another common cause of trust litigation is if the trustee does not follow the explicit directions set forth in the trust. Trusts are typically written with detailed instructions and clear language. If a beneficiary feels they are not receiving appropriate portions of the assets per the terms of the trust or feel that the trustee is mismanaging the assets or misinterpreting the temrs of the trust, trust litigation may arise.
There are many reasons why trust litigation may occur. However, trustees should seek the advice of a qualified trust administration lawyer to advise them regarding their duties, so that litigation may be less likely to occur. To schedule an appointment with the trust administration lawyers of Brown Law Firm, call (303) 339-3750.