Trusts are legal arrangements that allow another party to manage your assets when you are unable to do so yourself. However, it is crucial to abide by the state’s legal requirements when creating a trust to ensure its validity. Otherwise, interested parties may suspect foul play, challenge it in court and render it void.
Although a contest can protect your trust from misuse, it can also create unwelcome difficulties for you and your beneficiaries.
What triggers a trust contest?
A trust that suddenly favors a new party or includes sudden and unexpected changes could trigger the suspicion of interested parties. For example, if you promised your children equal shares, but your trust indicates that only one of them will receive assets, this discrepancy may push your other children to contest the trust.
However, dissatisfaction over the distribution of assets is often not enough to invalidate or contest a trust. Interested parties, including beneficiaries, successor trustees or heirs, must provide the court with legal grounds if they want to challenge a provision on your trust.
The court may decline to enforce your trust due to the following reasons:
- Evidence that demonstrates a lack of mental capacity while forming or making changes to the trust
- Presence of coercion or undue influence while you were creating the trust
- Signs of forgery or use of vague language
- Lack of adherence to legal formalities
- Mismanagement of trust assets by trustee
What are the consequences of an invalid trust?
Different scenarios may arise if the court determines your trust is invalid. It may affect the distribution of assets. Because the trust is unenforceable, distribution may revert to the provisions of an older trust. If there is none, the state’s intestacy laws will dictate the distribution of assets to your surviving relatives.
An invalid trust may also spark lawsuits, particularly if beneficiaries become excluded from distribution. Nevertheless, all this may not be in line with your wishes.
Steering clear of these complications demands a trust that meets state requirements and is error-free. Forming and reviewing a trust with the help of an experienced lawyer may help ensure that it is legally sound. If you have beneficiaries relying on this trust, it is not worth risking any missteps.
