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What Happens if Someone Sues a Trust?

Bochnewich May 15, 2022

Trusts can be a great way to protect your assets and provide for your loved ones after you’re gone. They are formal arrangements that can be used to manage property and assets and can be an important part of your estate planning. However, there are many questions regarding trusts. One crucial question is what happens if someone sues a trust? What are the risks, and how can you work to protect yourself? By better understanding the potential risks, you can make sure that your trust is structured in a way that minimizes your exposure.

What Is Typically Included in A Trust?

A trust is a legal arrangement in which one person, called the trustee, holds property or assets for another person, called the beneficiary. The trustee manages the property or assets on behalf of the beneficiary according to the terms of the trust. Trusts can be used for a variety of purposes, including estate planning, asset protection, and charitable giving.

Common items that are held in trust include:

  • Real estate

  • Investment accounts

  • Cash

  • Life insurance policies

  • Personal property, such as art, furniture, or jewelry

Kinds of Trusts

There are many different categories of trusts, but some of the most common are:

  • Revocable trusts. A revocable trust can be modified or revoked by the grantor at any moment. This type of trust is often used for estate planning purposes.

  • Irrevocable trusts. An irrevocable trust cannot be modified or revoked by the grantor. This type of trust is often used for asset protection purposes.

  • Testamentary trusts. A testamentary trust is created by a will and only goes into effect after the death of the grantor.

  • Living trusts. A living trust is created during the lifetime of the grantor and can be revocable or irrevocable.

What Are Legitimate Grounds for A Lawsuit?

While you technically cannot sue a trust, you can sue the trustee. The trustee is the person who manages the trust and is responsible for carrying out the terms of the trust. There are several reasons why someone might sue the trustee, including:

  • Breach of fiduciary duty. The highest standard of care is a fiduciary duty. It is designed to protect the beneficiaries of a trust from being taken advantage of by the trustee. If the trustee violates this duty, the beneficiaries may have grounds for a lawsuit. For example, if the trustee fails to manage the trust property properly or illegally uses trust funds for their own benefit.

  • Breach of contract. If the trustee fails to follow the terms of the trust agreement, they may be in breach of contract. This could happen if they fail to distribute assets according to the trust agreement or if they make decisions that are not in the best interests of the beneficiaries.

What Are the Risks of Being Sued as A Trustee?

If you are sued as a trustee, there are several risks that you may face.

Firstly, you could be held liable for any damages that are awarded to the plaintiff. This means that if the court finds in favor of the plaintiff, you could be responsible for paying out of your own pocket.

Secondly, you could be removed as a trustee. If the court finds that you have breached your fiduciary duty or violated the terms of the trust agreement, they may remove you from your position. This could leave the trust without a trustee and put the beneficiaries at risk.

Lastly, you could be subject to criminal charges. If the court finds that you have committed fraud or embezzled trust funds, you could be facing criminal charges with repercussions from hefty fines to time in jail.

How Can You Protect Yourself as A Trustee?

There are several things that you can do to protect yourself as a trustee, including:

  • Being clear about your role and responsibilities. Before you agree to take on the role of trustee, make sure that you understand all of the duties and responsibilities that come with it. This will help you to avoid accidentally breaching your fiduciary duty or violating the terms of the trust agreement.

  • Keeping good records. Good record-keeping is essential for any trustee. You should keep track of all decisions that you make and the reasoning behind them. This will help to show that you are acting in the best interests of the beneficiaries and can help to defend against any allegations of wrongdoing.

  • Keeping open communication. Communicating with the beneficiaries is important. Keep them updated on what is happening with the trust and get their input on any decisions that you need to make. This can help to avoid misunderstandings and can help to build trust between you and the beneficiaries.

  • Getting professional help. If you are not sure about how to handle a particular situation, it is always best to get professional help. This could be from an attorney or accountant. They can help you to navigate the complexities of the trust and make sure that you are doing everything correctly.

Do I Need a Lawyer to Help Me with My Trust?

Trusts can be complex legal documents, and the average layperson may not understand all of the intricacies involved. If you are considering setting up a trust, it is always best to consult with an experienced attorney. They can help you to understand the law and make sure that your trust is set up correctly. Understanding that this is a complex process that requires the help of an expert can help to protect you from being sued as a trustee.

An attorney can also help you if you are sued as a trustee. They can help to defend you against the allegations and represent you in court. Having an attorney on your side can help to minimize the risk of being removed as a trustee or facing criminal charges.

Suing a trust can be a complicated process, and it is important to understand the risks that you face as a trustee. If you are sued, the best course of action is to consult with an experienced attorney who can help you to navigate the legal system and defend your interests.

Contact Bochnewich Law Offices Today

If you need legal assistance with a trust, the experienced attorneys at Bochnewich Law Offices can help. The level of knowledge and experience that our attorneys possess is necessary to protect your interests when dealing with a trust. We have already helped many clients with their trust needs, and we can assist you too. Contact us today to schedule a consultation. We look forward to speaking with you.