INDIANA TRUST LITIGATION
Unlike a last will and testament that requires the court to oversee the identification and distribution of assets when someone dies, a trust has no such corollary. A trust is simply a written document or contract between the Grantor (Settlor), the Trustee and the Beneficiaries. As long as the writing sets out the roles, identifies the beneficiaries and the property in the trust and the property makes its way into the trust – there is a valid trust.
Also, unlike the formalities of a signing a last will and testament that requires the maker of the will to actually sign the will in the presence of two witnesses, trusts do not have any such requirements. Also unlike a last will and testament that takes effect when the testator passes away, a separate trust takes effect when it is signed, which can be years before any beneficiary even knows the document exists. Additionally, it may take years or generations to live out the purpose of the trust. Because of the nature of trusts, and the lack of judicial oversight, some folks think they can take advantage of the situation.
TRUSTS IN GENERAL
Generally, trusts are set up to protect the rights of its beneficiaries. For instance, if a dad is concerned about a son’s business dealings or spending habits, the trust can be set up to protect the money from the son’s creditors. Despite the good intentions of the Grantor, there are sometimes situations where a beneficiaries rights are violated by the person or people who are put in charge to protect the rights.
WAYS TO CHALLENGE AN INDIANA TRUST
Typically trust challenges come in three flavors
- Trust Formation
- Breach of Fiduciary Duty
- Trust Administration Disputes
TRUST FORMATION DISPUTES
Because a trust is a writing or for lack of a better word, a contract, the first question that needs to be answered is – was the Grantor (Settlor) competent when she signed the document. If she did not have the competency the trust can be invalidated.
Questions that need to be asked and answered
- Did the Grantor have a sound mind when he signed the trust?
- If there were any changes to the trust document – did the Grantor have a sound mind when she changed or modified the trust?
BREACH OF FIDUCIARY DUTY
The Trustee has an obligation, known as a fiduciary duty, to protect the beneficiaries interests and manage the trust according to its terms. The nature of a fiduciary relationship requires the Trustee to take the beneficiaries interests above his or her own interests.
Another area where a trust can be challenged is at the level of the Trustee. Many times a dispute arises between the Trustee and beneficiaries regarding whether the Trustee is complying with the wishes of the Grantor. The question that will be asked – is the Trustee fulfilling the terms of the trust?
IN INDIANA, TRUSTEE’S HAVE A NUMBER OF DUTIES AND RESPONSIBILITIES THAT INCLUDE:
- A duty to administer a trust according to the terms of the trust;
- Take possession and maintain control over trust property;
- Preserve the trust property;
- Make the trust property earn income for the beneficiaries;
- Keep the trust property separate from the Trustee’s individual property;
- Maintain good records;
- Inform beneficiaries of what is going on with the trust property;
- After the initial Grantor has passed away, provide a copy of the trust to the beneficiaries if requested;
- Defend any actions that may be brought against the trust;
WHAT RIGHTS TO TRUST BENEFICIARIES HAVE?
Beneficiaries of a trust have some general rights and some specific rights based on the terms of the trust document. Typically, a beneficiaries rights include:
- Financial Distribution
- To learn relevant information about the trust
- Accountings and Valuations of trust property
TRUST ADMINISTRATION DISPUTES
This category of dispute overlaps with a breach of fiduciary duty, because if the Trustee is doing his/her job in the eyes of the beneficiary, then there shouldn’t be a dispute of administration. Some of the areas where a disputes develop include:
- Conflicts of Interest
- Failing to make distributions
- Taking money from the trust
- Failing to follow the terms and intent of the trust
- Acting in one’s own interest (self interest)
- Abusing discretionary distributions
If a Trustee is not following his or her duties the trust can be removed by a court.
If you have any questions about Trust litigation in Northwest Indiana, call (219) 690-8997.