Though it is ideal for a trust’s administration to run smoothly, there is always a possibility for it to face some issues, such as disputes. Nonetheless, these issues do not have to be a problem with proper management. However, if not prevented or addressed promptly, they can disrupt the distribution of trust assets.
Hence, it is important for administrators and beneficiaries to familiarize themselves with the common trust disputes. This way, they can develop strategies to prevent them, or in case it already happens, to address them effectively.
Challenges to trust validity
Involved parties may contest a trust’s validity on certain grounds, such as undue influence, lack of mental capacity, fraud or improper execution. As a result, it can cause delays in asset distribution, increase costs and put involved parties in emotional distress.
Disputes over trust interpretation
If the trust terms are ambiguous, beneficiaries or trustees may disagree on how the trust document should be interpreted and what the settlor’s intentions were. On top of delaying the process, it can cause family conflicts and irreparable rifts in relationships.
A trustee’s breach of fiduciary duty
If beneficiaries believe that the trustee is not acting in their best interests, mismanaging trust assets or failing to communicate effectively, it may lead them to seek the removal of the trustee. This delays the process since the court has to find and appoint a new administrator to take the vacant position.
Prevention is key
To prevent issues like the ones mentioned above, it is essential to have a clear and well-drafted trust document that outlines the settlor’s intentions, the terms of trust administration and the rights and obligations of all parties involved. Additionally, trustees should act transparently, communicate effectively with beneficiaries and adhere strictly to their fiduciary duties.
Accordingly, seeking guidance from a competent legal representative when establishing and administering a trust can help minimize the potential for conflict.