Trust Litigation Attorneys Serving Southern California

A trust is a legally binding agreement — sometimes drafted with the help of a trust litigation attorney — that allows a third party, known as a trustee, to hold the property, financial resources, and other assets of an individual. The trustee manages the assets on behalf of a beneficiary. The structure of a trust varies greatly depending on the state in which the trustor resides and how and when he or she wants to pass assets to the beneficiaries.

Many California residents choose to add a living trust to their estate plan. Trusts outline the distribution of property from one generation to the next and are popular with many individuals because of the benefits. Assets in a trust may be passed to a beneficiary outside of the formal probate process, saving time, eliminating court fees, and reducing estate taxes.

As with many other legal actions, such as real estate litigation, there may be problems with a trust that require trust litigation. Problems are most often associated with trustees and their behavior surrounding the distribution of property. Since there is no single statute of limitations that applies to all trust matters in California, lawsuits can be filed years after the wrongful act and proceedings can linger in court for years. To help guide you through the process, you need an estate planning attorney experienced in litigation matters.

Role of The Trustor, Trustee, and Beneficiary

A trust is an arrangement involving three parties. The trustor, sometimes referred to as the grantor, is the individual who creates the trust. The trustee is the person or persons, or entity in some circumstances, agreeing to hold assets placed into the trust. The third person is the beneficiary, the individual who receives the assets as indicated in the trust agreement.

A person can hold multiple positions within a trust agreement. For example, a trustor can also be listed as a trustee or beneficiary. The trustor often acts as the trustee while still living.

Revocable vs. Irrevocable Trusts

There are many types of trusts. The major difference between trusts is whether they are set up as irrevocable or revocable. A revocable trust, also referred to as a living trust, has flexible terms and can be dissolved if your needs or intentions change. Living trusts allow assets to be distributed to a beneficiary without a lengthy probate process but allow the trustor to retain control of the assets while still living. You can put provisions in the trust to allow for a trustee to manage the trust in the event you become incapacitated. Generally, a revocable trust becomes irrevocable when the grantor passes away.

On the other hand, irrevocable trusts cannot be amended once executed. Assets are transferred out of the grantor’s estate upon execution of the trust. Many people choose an irrevocable trust over a revocable trust to reduce the amount of estate taxes. The estate is not subject to taxes once the assets have been transferred out of the ownership of the estate.

Basic Reasons for Trust Litigation

Trust litigation is a specialized area of the law that often requires multiple petitions and complaints to solve an issue or a few related issues involving a trust. For example, one issue may lead to additional petitions regarding another situation such as elder abuse or undue influence claims.

There are many reasons a petitioner may file a trust litigation complaint. First, the beneficiaries may disagree on the contents of the trust or how the document is constructed. Second, the beneficiaries may have problems with the way the trustee is handling the assets in the trust. Other issues that may lead to litigation include:

• Whether the grantor had the legal capacity to execute the trust.

• Whether the grantor was pressured or faced undue influence to create the trust.

• Whether the signature was forged or if other issues of fraud are suspected.

Many disputes end up in probate court. To begin the judicial process, a petitioner needs to file a suit. For example, if one of the beneficiaries is petitioning to have the trustee removed, a dispute is filed asking the trustee to account for all trust assets and to repay any damages.

The trustee formally responds through an attorney, the discovery process begins and a trial can ensue. Often, the trustee requests the trust to cover the costs of the defense. If the petition is granted, the trustee may be required to pay back any legal costs if found guilty of violating fiduciary duty.

In probate court, the same rules apply as in other legal proceedings. The standard rules of evidence and discovery regulations apply. There is usually no jury present in probate cases.

Fiduciary Breaches

Typically, beneficiaries are the ones who realize there is an issue with a fiduciary because they are the ones who stand to lose the most if fraud occurs. While there is no overarching body enforcing a trustee’s role, a beneficiary has a right to file a claim if his or her rights are being violated. Here are some signs that a breach of trust has taken place:

• The trustee’s finances become intertwined with the finances of the estate. Trustees must keep clear records to create a distinction between their funds and the estate’s funds. Beneficiaries have the right to request these records. If records cannot be produced, a breach may have occurred.

• A conflict of interest arises in which the trustee has reasons to act in a manner that is contrary to the wishes of the grantor. In general, trustees must not borrow money from the trust or benefit in any manner from their role as a fiduciary.

• The trustee fails to stop or enables a co-trustee from acting in a way that constitutes a breach of trust.

When a breach of trust occurs, the beneficiaries may suffer financial losses. California law allows victims of fiduciary breaches to sue the trustee for damages.

Contact Bochnewich Law Offices

Bochnewich Law Offices is a firm located in Palm Desert, California, specializing in estate law. Our areas of expertise include business succession planning, estate and trust litigation, trust administration, and probate and elder law. Contact us today to set up a consultation with an experienced attorney.