A trust is a valuable tool to take care of your family after you are gone. They enable you to avoid probate for the named assets, protect privacy, avoid certain fees and taxes, avoid lengthy delays, provide financial care for minor children and many other benefits. But how safe is a trust? Is it possible to contest a trust in Maryland?
There are circumstances where disinherited heirs or certain interested other people may contest a trust. Let’s explore when a trust may be contested in Maryland, the possible legal grounds, how to contest a trust, and how to protect your trust from being contested.
What Is a Trust?
A trust is a legal entity created to hold and manage assets for the benefit of its named beneficiaries, usually family members. The person who creates the trust is the grantor (sometimes also referred to as the settlor or trustor). The trust is managed by a trustee, who holds legal title to the assets and is responsible for administering the trust according to its terms.
There are two primary types of trusts:
- Revocable Living Trusts: A revocable living trust can be altered or revoked by the grantor during their lifetime. After the grantor’s death, the trust becomes irrevocable.
- Irrevocable Trusts: Once established, an irrevocable trust generally cannot be changed or revoked by the grantor.
How Can a Trust Help Me Avoid Probate?
Probate is the legal process that establishes the validity of a will. Once the probate court determines the will is valid, the court supervises the distribution of the probate assets the decedent owned individually.
However, some assets are not part of the probate process. These include life insurance and other policies with named beneficiaries, retirement plan funds, and jointly held assets. Upon death, these transfer automatically to the beneficiaries without probate.
The assets held in a trust are also not probate property, because they are not owned by the grantor. The property in an irrevocable trust is owned by the trust immediately, and the assets in a revocable living trust are owned by the trust upon the grantor’s death. Therefore, the assets do not go through probate but are distributed to the beneficiaries immediately.
Is It More Difficult to Contest a Trust in Maryland Than to Contest a Will?
Trusts are generally considered more difficult to challenge than wills due to the processes required to challenge each, the background of the judges hearing the case, the nature of the evidence available and required, and differences in the laws mandating proper execution of wills vs. trusts. Here are some of the reasons.
Process and Expense
Will: To contest a will, the challenger can just file a Petition to Caveat with the Orphans’ Court, which is Maryland’s probate court. A Petition to Caveat is a document to prevent the Orphans’ Court from acting on the will without first notifying the petitioner so they can have an opportunity to be heard. The challenger need not provide any substantiation to file the petition.
Trust: Contesting a trust is a much more time-consuming, expensive, formal process. The challenger must file a complaint detailing grounds for the challenge in the Circuit Court, where the case will be heard by a Circuit Judge. A lawsuit of this kind involves filing fees, serving all interested parties and a discovery process which may involve interrogatories, depositions, and production of documents.
In other words, to contest a trust, the normal rules of court apply, including the rules of procedure and the rules of evidence. Filing a formal complaint in Circuit Court is much more expensive in terms of fees and attorney billing time than filing a petition in Orphans’ Court. This alone can be enough to deter some frivolous claims.
The Judges
Will: In many counties in Maryland, Orphans’ Court judges are elected officials who are not required to be attorneys or in fact have any legal background. That means if someone contests your will, the person deciding the case may have little if any legal training.
Trust: Circuit Court judges are experienced attorneys appointed to their positions due at least in part because of their knowledge and background in the law.
The Defense
Will: When a will is contested, it is always after the testator is dead, so of course they are not available to inform the court about their intent.
Trusts: In the case of a revocable living trust, if the trust is challenged during the grantor’s lifetime, of course the grantor would be available to testify regarding their intent.
But if someone contests either an irrevocable trust or an irrevocable living trust after the death of the grantor, it is still going to take strong evidence to overturn the trust. A Circuit Judge is not going to want to invalidate the actions of a trustee who has already been administering a trust for years.
Technical Execution
Wills: Maryland law is very specific regarding technical execution of wills such as signatures, witnesses, and other structures necessary to create a valid will. What may appear to be a minor mistake can invalidate an entire will.
Trusts: Maryland has fewer technical requirements regarding trusts. This makes trusts much harder to attack for improper execution.
Who Has Standing to Contest a Trust in Maryland?
For someone to contest a trust (or a will for that matter), they must have legal standing to do so. Those with legal standing would include
- Disinherited heirs who would were left out of the trust. These would be people who could have inherited had the grantor died intestate.
- Beneficiaries who believe the trust is invalid. For example, one adult child may have been left significantly more than another and believes there is grounds to contest the trust on various grounds.
What Are the Grounds to Contest a Trust in Maryland?
There are several recognized grounds under Maryland law for contesting a family trust. They include but are not limited to the following:
Fraud or Forgery: The grantor was tricked into signing the document or their signature was forged.
Incapacity: The grantor was unable to understand the consequences of creating the trust, that is, the nature of the trust, the extent of the property covered by the trust, or the identity of their beneficiaries.
Undue influence: Someone has pressured or manipulated the grantor to create the trust and to distribute the assets as directed. This is particularly cause for concern if the grantor is elderly or infirm.
Duress: The grantor was threatened or coerced in order to obtain a signature on the trust document. This is more extreme than undue influence. An example might be a would-be beneficiary threatening to reveal embarrassing information about the grantor.
Improper Execution: In order to be valid, the trust must be executed in accordance with Maryland statutes. For example, following the law regarding signatures and witnesses is important to proper execution.
What Are the Steps to Contesting a Trust in Maryland?
To contest a trust in Maryland, you must file a lawsuit. Steps include:
- File a complaint naming the grounds for contesting the trust in the appropriate Maryland Circuit Court.
- Serve the defendants including the trustees and named beneficiaries of the trust.
- Conduct discovery and respond to the defendants’ discovery requests. This may include taking depositions in addition filing and answering interrogatories, and requesting relevant documents such as medical records.
- Consider mediation or settlement to resolve the matter.
- Litigate if you cannot come to a resolution through mediation or settlement.
- Appeal: The losing party may appeal the decision
Contesting a trust is not a quick process. Prepare yourself to spend months or even years before the matter is resolved.
What Happens If the Challenge to the Trust is Successful?
If the court finds the trust is invalid, it can either
- Fully invalidate the trust, in which case the assets may pass through probate or
- Partially invalidate the trust, where only certain provisions of the trust are voided
How Can I Prevent My Trust from Being Contested?
There is no way that you can completely guard against a trust contest, but here are some ways you can reduce the risks.
- No-contest clause – A no-contest clause in a trust states that any beneficiary who contests the trust will forfeit their inheritance if they fail in their challenge. However, be aware that a court may not enforce the clause if it feels the person contesting the trust had probable cause and acted in good faith.
- Proof of mental capacity – The grantor may want to consider taking measures to prove their mental capacity if they think that could be questioned. Such measures may include a medical evaluation and taking video of the trust signing.
- Demonstrate no undue influence – To demonstrate no undue influence, it may help for the grantor to meet alone with the estate planning attorney.
- Talk to your family – If your family knows what to expect in advance, they are less likely to contest a trust than if its terms come as a complete surprise upon your death.
- Consider a corporate trustee – Appointing a neutral party as your trustee may reduce suspicion of shady activities such as forgery, duress or undue influence.
- Keep your trust updated – If it appears your trust did not take into account major life events such as marriages, divorces, births and so on, it is much more likely to be contested.
- Work with an experienced Maryland estate planning attorney – Get an attorney who will draft a clear trust document that does not encourage questions and is in complete compliance with Maryland law.
While trusts are reliable estate planning tools, they are not immune from legal challenges, much like anything else. Individuals with legal standing may contest a trust in Maryland on grounds such as lack of capacity, undue influence, fraud, forgery, duress, or improper execution.
No matter the outcome of a trust contest, these disputes can be emotionally and financially draining. That’s what makes it so important to work with an experienced, thorough estate planning attorney to create your trust.
Concerns About Avoiding Challenges to Your Trust After Death?
It is possible to contest a trust in Maryland, but there is much you can do to prevent it. If you are concerned that a relative or other interested person could challenge your trust, one of our experienced Maryland estate planning attorneys can help. Schedule a consultation to get the facts, learn the options for your own situation, and make a plan.