How to Challenge a Trust

Typically, trusts are used to avoid the courtroom and thereby stay clear of probating through the court system because trusts can provide for the distribution of assets at death (as well as during a person’s lifetime).  In doing so, avoiding the courtroom saves their beneficiaries time, money, and frustration.  However, there are many instances where parties will challenge the actual trust, the actions of a trustee, or the validity of the trust itself and therefore lawsuits will commence.

Validity of a Trust – Most commonly, a person involved with the trust or outside the trust may file suit challenging the legal validity of a trust, and may do so in numerous ways, some of which are similar causes of action brought under a will contest.  They include first, a mistake in execution, where an express trust is not executed in conformance and with the formalities required by Florida law, including Fla. Stat. § 737.111.  Second, undue influence, which as discussed in previous posts relating to wills, challenges whether the person making the trust did so freely and without being coerced by another person who was in position to do so, usually involving a person with trust, confidence, and control of another.  And third, lack of capacity, which is based upon the belief that at the time the trust was executed, the person making the trust did not have the requisite mental ability to understand the nature of his property, people who would receive such property, and how the trust property would be disposed.  This type of litigation relies heavily on medical records and the testimony of experts.

Challenges to the Trustee – Numerous lawsuits involve the person controlling the funds and property within the trust, and not challenging the content of the trust itself.  These challenges against the trustee can include a breach of fiduciary duty, removal of a fiduciary, a surcharge action, or an accounting action.  In a breach of fiduciary duty, the nominated trustee has failed to properly administer the trust, either by omission or overt action that breach the duties and responsibilities charged as trustee.  A person can try to remove the trustee from managing the trust, or may file a surcharge action, which is against the fiduciary to restore any pecuniary lose sustained by the fiduciary’s breach of duty.  Finally, in an accounting action, a trust’s beneficiaries have the right to compel the trustee to produce records of all assets and seek judicial intervention if the accounting is objectionable.

Alternatives to a Trust Contest – Under the Florida Trust Code, there are several other options for interested persons who are seeking justice in connection with a trust that do not include declaring a trust invalid, in whole or in part.  First, a party may seek a non-judicial settlement agreement, which is a binding agreement with respect to any trust matter used to avoid often uncertain outcomes that may come with trying a case through a verdict and gives the parties some control over the ultimate result.  See Fla. Stat. § 736.0111. Furthermore, a party may seek a type of trust modification or termination.  Under Florida law, trusts can be modified in a manner consistent with the settlor’s purpose, and permits judicial modification if it serves the best interests of the beneficiaries.  Thirdly, Florida law provides a process for a trustee or court to modify or terminate an uneconomic trust.  If a trust has property worth less than $50,000, a trustee may terminate the trust on their own initiative if they conclude that the value of the property is insufficient to justify the cost of administration.  The court itself may file a similar action.  Another alternative to a trust contest includes trust reformation, where an interested person may ask the court to reform the terms of a trust to conform with the settlor’s intentions if it is proved by clear and convincing evidence that the settlor’s intent and terms of the trust were affected by a mistake.  Reformations are available for mistakes in law, in fact, expressed, in the inducement of, and whether or not the terms of a trust are ambiguous.  Finally, statutory grounds for removal of a trustee include a serious breach of trust, lack of cooperation among co-trustees, and unfitness, unwillingness, or persistent failure to effectively administer the trust under Fla. Stat. § 736.0706.  If all beneficiaries agree, Florida law further allows the removal of a trustee without the showing of malfeasance, and only requires that the removal best serve the interests of all beneficiaries, and it is not inconsistent with a material purpose of the trust.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.