What is trust litigation?

Trust litigation, broadly speaking, is any lawsuit that centers on a trust or the rights and duties of trustees or beneficiaries.  Although there are many types of trust litigation, most cases involve one or more of a few common allegations.

Many trust litigation cases involve allegations of breach of trust.  In a breach of trust case, a beneficiary accuses the trustee of violating either the terms of the trust or the rules governing the duties of trustees found in the California Probate Code.  This might involve the trustee embezzling trust funds, failing to diversify trust assets, making bad investment decisions that cause the trust to lose money, failing to keep the beneficiaries informed about trust affairs, or failing to account to the beneficiaries.

Trust contests are another common type of trust litigation.  In a trust contest, a beneficiary or heir of the settlor (the person who creates the trust) challenges the validity of the trust.  The two most common grounds for contesting a trust are undue influence and incapacity.  Undue influence is the allegation that someone pressured the settlor to sign a trust against their own will.  To prevail on an undue influence claim, the person challenging the trust must show that the undue influence—the pressure—was so severe that it overcame the free will of the settlor.  Because undue influence typically occurs “behind closed doors” it is usually difficult to find direct evidence of undue influence.    Needless to say, it is difficult to win an undue influence case

A trust contest based on incapacity alleges that the settlor lacked the mental capacity to understand the terms of the trust; because the settlor was not of sound mind when he signed the trust, the trust should is invalid.  Evidence of incapacity is typically found in medical records and in the testimony of family and close friends who interacted with the settlor often.  The attorney who drafted the trust is an important witness because the issue is whether the settlor understood what he was signing at the moment he signed the trust.

Another common type of trust litigation involves the removal and replacement of a trustee.  When a beneficiary files a petition alleging breach of trust, he usually also asks the court to remove the trustee and replace them with either a successor trustee named in the trust, a close family member or friend, or a professional trustee.

Finally, many trust litigation cases involve trust accountings.  Unless a trust waives accountings (meaning that the trust says the trustee has no duty to account), California law requires that trustees provide the beneficiaries with annual accountings.  It is common for trustees to forget or neglect this duty.  Even when the trust waives accountings, a trustee must prepare an accounting within 60 days if a beneficiary requests an accounting.  One of the first steps in a trust litigation case is often a beneficiary requesting an accounting by the trustee and then petitioning for removal and for breach of trust if the trustee does not provide an accounting within 60 days.