Can a Living Trust Be Disputed?

By Maggie Lourdes

A living trust is an estate planning tool that allows a person's property to bypass probate court proceedings after death. At the same time, living trusts generally allow people to maintain full control over their assets during their lifetimes. Trusts are governed by state law and, like all legal documents, must comply with applicable statutes. A trust that does not conform with the law may be challenged in court and partially or completely invalidated.

Standing to Dispute

Not just anyone can dispute a living trust. A person must prove she has legal standing to challenge a trust. This means a party must show she would be harmed if the trust terms were enforced. For example, John Smith's trust leaves his assets "to all my children, Betty and Mary." John has another child, Sally, who the trustee tries to eliminate because she is not mentioned by name. Sally has standing to argue her father accidentally left out her name since the trust states all of his children are to receive his property.

Technical Disputes

Each state has its own laws governing the technical legal requirements for making a trust. Generally, a person making a living trust must be at least 18 years of age. Trusts must be made to accomplish a legal purpose. For example, a trust cannot be made for the specific intention of laundering money. Trusts that hold real estate must be in writing and signed by the trust's maker. A person may dispute the legal enforceability of a trust if he can prove it fails to meet a technical, legal requirement.

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Fraud

A trust may meet all technical requirements, but it still may fail if fraud exists. For example, Bob is tricked into signing a trust for his house after being told it is a contract for lawn services. The legality of the trust can be disputed because Bob was fraudulently induced to sign. Even if Bob is a competent adult, and the trust is signed and in writing, a court could invalidate it based on fraud.

Pressure and Conflicts

A party must sign a trust under his own free will. If a person signs under duress, while being physically threatened, for example, the enforceability of the trust can be disputed. Undue influence is a similar ground for disputing a trust. Undue influence occurs when someone, such as an elderly person, is pressured or rushed into signing a legal document. A trust may also be challenged if a person closely involved with the drafting, witnessing or encouragement for a trust stands to gain by its terms. Such conflicts of interests may undermine the trust's validity.

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What Happens to a Trust When No One Is Named As a Beneficiary?
 

References

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