Unclear And Subjective Trust Conditions Can Lead To Legal Problems

Many of us will be left an inheritance in a trust, or we will create a trust for the benefit of our friends or family members. And with that trust will come terms and conditions for the distribution of those assets.

A trust can have many conditions or goals to be met, before the property in the trust is inherited. Some of these conditions are objective, but some are subjective.

Objective Conditions

For example, time and age requirements are objective. The trustee has little discretion; when the age or time requirement has been met, the trustee must distribute whatever properly you have put into the trust to whomever you have designated to receive those funds.

Objective goals also leave little discretion. For example conditioning an inheritance to someone getting married, or graduating school, or buying a home, are all things that give a trustee little discretion; other than verifying whatever the event has actually occurred, the trustee can easily determine whether the property in trust should be distributed.

Subjective Conditions

But other times, there are more subjective conditions placed on a trust. These conditions may have little definition, thus, placing a lot—sometimes too much—discretion in the trustee.

For example, a trust may simply leave money for the benefit of someone else, or for their health, or for their support. This can result in a situation where there is a disagreement between the trustee, and the potential beneficiary.

For example, money may be left for the “support” of a beneficiary. But what is support? Does support include luxury or entertainment items—or only the necessities of life like food or rent?

When a beneficiary thinks he or she is entitled to a distribution of trust monies, but the trustee disagrees, the beneficiary effectively has lost the inheritance—yes, it is still there, but the refusal to distribute those funds effectively locks the beneficiary out of the inheritance.

Getting A Trust Distribution When the Trustee Disagrees

Court action may be necessary in this case, to force a court to suspend or replace the named trustee, especially if the trustee’ decision seems to be based on some kind of bias. The court can also order the trustee just to make the requested distributions, and in some cases, the court may be able to just completely dissolve the trustee, and distribute all the property that was in the trust.

Draft Documents Wisely

Problems like this can often be avoided through good estate planning and trust drafting, making sure to properly and fully define all terms and conditions. Additionally, a trust can include an alternative dispute provision, whereby the parties agree to go to a mediation or arbitration to try to resolve distribution disputes.

You can have the benefits of a trust, while also avoiding potential problems and legal disputes between a trustee, and your beneficiaries. Call the Torrance will and estate attorneys at Samuel Ford Law today.

Sources:

extramile.thehartford.com/lifestyle/finances/inheritance-theft/

investopedia.com/terms/t/trust.asp