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Top Reasons for Disputing a Trust in Virginia

Nathan R. Olansen

A trust is a valuable tool for saving your loved ones from the probate process and reducing disputes over inheritances. Unfortunately, there is still a chance that your trust will be disputed after you are gone. Learn about trusts, common reasons for disputes, how to go about disputing a trust in Virginia, and how to minimize the risk of disputes when creating your own trust. For help with any of these, contact the experienced estate and trust litigation attorneys with Midgett Preti Olansen.

What is a Trust?

When it comes to estate planning, creating a trust document is one of the best ways to protect your assets and plan for beneficiaries. A trust is a legal fiduciary agreement that holds your assets. The person who creates the trust is known as the grantor or settlor. Trusts are governed by a trustee, who can be an individual, trust company or law firm that you appoint.

Under your trust, you can add real estate, tangible property (e.g., vehicles, jewelry, fine art, collectibles, etc.), cash accounts, large assets, business interests, stocks, bonds, brokerage accounts and more. You can even include retirement accounts in the trust by naming it the designated beneficiary.

A few of the benefits of establishing a trust for a grantor include:

  • Beneficiaries receive assets without having to undergo the probate process.
  • Your wishes are kept private, as trusts are not public records.
  • A trust allows you to take protective measures while you are alive.
  • A trust avoids the conservatorship process, and provides for the administration of your assets in the event of your incapacity
  • A trust can reduce or eliminate gift and estate taxes.

There are several different types of trusts available in Virginia, so work with an experienced estate planning attorney to determine what will be most beneficial for you and your family. These trusts include:

  • Revocable Living Trust
  • Irrevocable Trust
  • Testamentary Trust
  • Grantor Retained Interest Trusts
  • Charitable Trusts
  • Self-Settled Spendthrift Trust
  • Special Needs Trust
  • Discretionary Trust

How to Dispute a Trust in Virginia

To dispute a trust in Virginia, certain steps must be taken, starting with filing a lawsuit in circuit court. In this lawsuit, you must include your reasons for contesting the trust. You must also prove you have legal standing to challenge the trust.

You must also adhere to the deadlines for filing. For example, if you are contesting a revocable trust in Virginia, you must do so either within two years from the date of the settlor’s death or within six months after you receive notice from the trustee.

When Can a Trust Be Contested in Virginia?

Trust disputes are disagreements regarding the validity of a trust or its administration, and often revolve around the construction of the trust itself or other legal issues relating to how the trustee executes the terms. In Virginia, there are three primary reasons for disputing a trust.

  • Whether the trust is legally valid
  • Whether the trust represents the true intent of the settlor
  • How to interpret the trust documents

Can a Living Trust Be Contested?

A living trust is one in which the grantor can place assets during their lifetime to allocate those assets to named beneficiaries upon their death. After the grantor’s death, the living trust becomes irrevocable, and the designated trustee will conduct the administration of the trust and the distribution of its assets. While this is a legal document, a living trust can be contested by a person with a beneficial interest in the trust, which means they stand to gain in some way from taking action. This includes current beneficiaries, people who were beneficiaries in an older version of the settlor’s trust or will, or people who would be beneficiaries if there was no trust or will.

To initiate a contest to a living trust document, you must file a suit in Virginia circuit court. If the trust is invalidated, the court will look to a previous trust document or will to distribute assets. If neither exists, the assets will be distributed following intestate succession law.

Can an Irrevocable Trust Be Contested?

An irrevocable trust is one which, once set up, cannot, in most circumstances, be amended or revoked. However, it can be contested in court under the same grounds as any other type of trust. The person contesting the trust must have some financial stake in the outcome of that challenge. If successful, such a contest’s results may nullify or modify the entire trust.

Can a Non-Beneficiary Contest a Trust?

Non-beneficiaries of a trust can contest a trust in Virginia, but only under specific circumstances. The ability to do so relies on the contest being brought by someone with standing. Standing means you would receive more assets if the trust were revoked. For example, children who have been disinherited in favor of a parent’s new spouse may be eligible under this condition.

Common Reasons to Dispute a Trust

The most common reasons for disputing a trust in Virginia include the following.

The Settlor Was Not of Sound Mind When Creating the Trust

Disputes can arise when it is believed that the settlor (trust’s creator) was not of sound mind or legal capacity to create a trust. That is, they could not make an informed decision when they signed the trust. If successful, this challenge to the trust usually invalidates the document by showing the decedent’s incapacity.

The Settlor Created the Trust Under Undue Influence or Duress

When there is a belief that the settlor created the trust under undue influence or duress, it can be contested under Virginia Trust Code § 64.2-724. Undue influence or duress occurs when one is coerced, influenced, or manipulated to establish a legal document. In other words, someone exerts power or influence over a person, and, as a result, that person does something they never wanted or intended to do. Undue influence and duress can also be used to contest amendments to a trust.

The Trust Was Created Fraudulently

Interested parties can contest a trust if the document was created fraudulently. Fraud occurs when an individual uses deception to misrepresent the truth. When creating a trust, such fraudulent activities can occur at different stages, including when creating, executing, or administrating it.

Common types of fraud in trust creation include receiving misleading or false information that is then included in the document. Another type is when the creator is unduly influenced to change the trust terms or beneficiaries. For execution, another person may forge the signature of the trust’s creator or misrepresent what is in the document to get them to sign.

The Trustee Failed to Carry Out Their Duties Properly

A trust contest may focus on the designated trustee for not properly carrying out their fiduciary duties. Examples of a trustee failing to carry out their fiduciary duties include:

  • Improper transfer of assets
  • Unfair treatment of the beneficiaries of the trust
  • Failing to respond to requests for information
  • Mismanagement or loss of trust assets

Trustees can be and often are highly scrutinized by beneficiaries of a trust. Thus, the designated representatives must keep detailed records and seek legal advice and guidance from an experienced Virginia trust administration attorney if challenged.

The Trustee Breached Their Fiduciary Duties

A trustee is the designated fiduciary of a trust and has the legal responsibility to carry out the terms outlined in the document. A breach of fiduciary duty can bring disputes and claims against that trustee, which might include the misappropriation of assets and the misuse of authority, which directly harms the interests of the beneficiaries.

The Trust’s Instructions Were Ambiguous

In reviewing the trust document, a beneficiary or other eligible person may find the included instructions ambiguous. In some trusts, one or more provisions can be interpreted in multiple ways. In that case, it is up to the court to resolve the ambiguous terms and reach an actual meaning to coincide with the decedent’s original intentions. This is referred to as a suit for Aid and Direction.

The Trust is Invalid Due to a Mistake

Another possible reason for disputing a trust is to claim that the trust is invalid due to some type of mistake. For example, mistakes surrounding the execution of the trust document or actual mistakes recognized within the document itself can lead to a challenge. In these instances, Virginia law allows the court to review and reform the mistaken terms of the trust to conform more to the settlor’s intentions.

A Beneficiary Was Not Named in the Trust

When a beneficiary is disinherited for whatever reason, they may choose to contest the trust to claim a share of the decedent’s property. These cases are often complex and emotionally charged, as disinheritance can feel like a slight against a family member.

The Beneficiaries Disagree Over Specific Property

husband and wife arguing

Disputes can arise when beneficiaries disagree over the distribution of specific trust property of the decedent. When this happens, a court review is typically necessary to resolve the issue. In most cases, the judge will attempt to stay within the terms of the trust document as much as possible. However, in some cases, the intentions are unclear, and the court will need to look at other factors, such as other documents, prior personal property distributions by the decedent to the beneficiary, and the conduct and actions of the parties bringing the dispute.

The Beneficiaries Dispute the Amount of Money Distributed to a Particular Person

When a particular person receives money from a trust, other beneficiaries may choose to dispute the amount. This challenge can happen if you do not distribute funds equally among your children, choose to distribute assets to non-family members, or designate assets for distribution that no longer exist at the time of your death.

The Trust Was Created for an Illegal Purpose

When someone believes a trust was created for an illegal purpose, they can contest it in court. Such illegal purposes can include the intent to defraud a creditor by using a trust to transfer over property, hiding it from those creditor claims or other liabilities. Another illegal purpose is when the trust is created against public policy, such as adding unreasonable restrictions or mandate before a beneficiary can receive a distribution from the trust. One example is when a decedent provides for a sibling but includes the restriction that they receive money only as long as they remain single.

The Trust is No Longer Needed

Someone can dispute the continuation of a trust, especially if the purpose of the trust has been completed, or the size of the trust no longer justifies the cost of administration. A trustee will usually dissolve the trust upon meeting all the obligations under the document. However, in some instances, it will need to continue, such as a special needs trust for a special needs adult child.

The Trust Has Been Revoked or Terminated

Sometimes, a trust is revoked or terminated by the settlor (while still alive) or a court and therefore is no longer valid. An interested party can contest a trust if they believe it has been revoked or terminated. They must provide clear and convincing evidence that the trust was revoked or terminated.

How to Avoid Trust Disputes When Estate Planning

During your estate planning and trust creation, you should take proactive steps to help avoid future estate disputes.

Choose Your Trustee Carefully

Spend time considering who will best serve as the trustee of your trust. The trustee should be a person, trust company or law firm you can trust to execute the terms of the trust and carry out your wishes once you are gone. Choosing a trustee who you trust will make trust administration much smoother.

Do Not Involve Beneficiaries in the Planning Process

While it may be difficult to exclude beneficiaries from the planning process, doing so will help prevent any challenges later on that someone unduly influenced you to include certain provisions. Instead, work with an experienced Virginia trust attorney and make your intentions and wishes known with straightforward language and terms in the document.

Communicate Your Plans With Your Loved Ones

Communicate your plans to create a trust with your loved ones. Communication is key, especially when discussing death and dividing assets among loved ones. Explain your goal, such as keeping them from going through the time-consuming litigation and the probate process. If you have a trustee in mind, choose a time to speak with them about the role they will need to undertake and confirm that they are up to the challenges that may occur.

Write and Sign an Explanatory Letter

Once you create your trust, take the time to write and sign an explanatory letter. Discuss your goals for creating the trust, how you made the inheritance decisions, why one beneficiary is to receive any particular assets, and anything else that may answer the questions that family members may pose. This letter is not a legal document but a way to communicate your intentions with your family and other beneficiaries. It can also be used as a supporting document to explain your intentions if any of the instructions in the trust are ambiguous or someone disputes your trust.

Update Your Trust Regularly

One of the most important actions you can take following the execution of a trust document is to update it regularly. These updates should occur when you have a change in life circumstance, assets or beneficiaries. Review your trust every two to three years, and speak with an attorney should you need to make changes.

Consult a Virginia Beach Trust and Estate Attorney

Trust disputes can create rifts between family members. To help avoid these as much as possible, consult a Virginia Beach trust and estate attorney when creating or updating a trust. By doing so, you can include specific language to meet your wishes and avoid ambiguity that might lead to a trust dispute.

How to Avoid Siblings Contesting a Trust

When siblings contest a trust, a family can be fractured forever. Such a dispute sometimes happens when one sibling receives a larger inheritance or a coveted heirloom. Contesting a trust may also result from suspicion of forgery or one sibling coercing the parents into giving them a larger inheritance. Below are a few things you can do to help avoid siblings contesting a trust and fighting with each other.

Practice Creative Conflict Resolution

Find ways to talk with your family, addressing any conflict creatively. Address any misunderstandings and disagreements, and get them out in the open. Let them know where you are coming from when making certain decisions concerning your trust. If you are a sibling considering contesting a trust, set time aside to meet with your other sibling(s) in a comfortable location to discuss the situation.

Communicate and Be Empathetic

Inheritance can bring out deep feelings, so you should communicate with your children and be empathetic to their feelings. Openly communicate about your estate planning measures beforehand so nothing surprises them.

If you are a sibling in disagreement, remember that everyone is grieving and may not act rationally. Keep this in mind and do your best to communicate.

Hire a Virginia Beach Estate Litigation Attorney

A Virginia Beach estate litigation attorney can assist in drafting estate planning documents so that the terms are clear for beneficiaries. Upon the death of the trust’s creator, an attorney can also help oversee the execution of the decedent’s estate and their trust. Resolving sibling disputes out of court will be the goal. If forgery or coercion is involved, an attorney can help one sibling build a case and seek a court decision.

What are the Chances of Successfully Contesting a Trust in Virginia?

Trusts are extremely difficult to contest successfully. This is because a trust is often created years before the settlor is old, infirm, or ill. As such, it is often much harder to prove incompetence. Another reason is that the settlers often manage their own trusts for years before handing control to anyone else, making it more difficult to prove that the terms are not the settlor’s intention.

However, when a trust is created shortly before death, contesting with evidence of incompetence, fraud, or undue influence could be easier. For legal assistance contesting a trust in Virginia, seek the advice of a skilled trust attorney to determine your chances of success.

How Much Does It Cost to Contest a Trust?

Contesting a trust can cost anywhere from a few thousand dollars to hundreds of thousands of dollars. The actual cost will depend on the case’s circumstances and the legal battle’s overall complexity. In some circumstances, you may be able to pay your attorney fees out of the estate or trust. However, it is highly recommended that you consult an attorney and consider the value of what is at stake when deciding whether to contest a trust. Some contests cost more than what you stand to gain.

The Importance of Hiring a Virginia Estate Litigation Attorney for Trust Disputes

Elderly couple speaking to a lawyer

With so many potential complications and requirements when contesting a trust, it is important to hire a Virginia trust and estate litigation attorney to help you through the process. Some of the ways this attorney can help include:

  • Drafting a trust that complies with Virginia law so disputes are less likely to occur
  • Evaluating the likelihood of a successful contest in your particular situation
  • Representing you in a trust dispute, should it come to that
  • Communicating with other parties, including the trustee and other beneficiaries

Place Your Trust in Us

Estate planning can be a daunting task. You need to know what is essential when creating a trust to help deter disputes in the future. For those considering disputing a trust, you also need to know your rights and what you must prove to have a successful outcome.

Place your trust in the experienced estate litigation attorneys at the law firm of Midgett Preti Olansen. We are conveniently located in Virginia Beach and serve clients throughout the Hampton Roads area, including Norfolk, Chesapeake, Suffolk, Hampton, Newport News, and the Eastern Shore. Call 757-687-8888 to schedule an initial consultation, or use our online contact form to get in touch.

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Written By Nathan R. Olansen

Shareholder

Nathan R. Olansen is a Shareholder in the law firm of Midgett Preti Olansen. His practice is focused on estate planning, probate and trust administration, IRS and state and local tax audit and tax collection cases, as well as individual and entity tax planning, asset protection and a variety of related transactional matters.

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