The Basics of Trust Litigation

More money, and more problems don’t just apply to the numbers in your bank account.

It also applies to trusts that involve multiple parties, assets, and the uniquely human interpersonal dynamics that leave trusts open for litigation.

What is trust litigation?

Trust litigation occurs when the trustees and beneficiaries disagree about trust assets. It involves legal disputes over a trust between trustees and beneficiaries.

Who’s involved in a trust?

Trusts are open to litigation because they contain many moving parts. As a fiduciary arrangement that allows a third party to hold assets on a beneficiary’s behalf, trust types and contents are as diverse as the people who create them.

  • Grantor. The party who establishes the trust.
  • Trustee. The party who oversees and manages the trust.
  • Beneficiaries. Those who benefit from the trust.

Reasons for Trust Litigation

From criminality to garden variety incompetence, there are four common qualifying reasons that necessitate trust litigation in Colorado:

Lack of Capacity

For a trust to be valid, the grantor must possess the mental capacity to understand the nature of the trust documents.

Undue Influence 

Like the above lack of capacity, undue influence is any form of influence or force that impacts the grantor’s free will and decision-making ability. Undue influence doesn’t just involve violence; it also encapsulates coercion, threats, or manipulation.

Unclear or Non-Transparent Accounting

Fiduciary obligations mandate that trustees must act in accordance to their beneficiary’s and grantor’s wishes. When a trustee’s actions reflect their own self-interest and cause the detriment o the beneficiaries, unclear, or non-transparent, accounting applies.

Incompetent Trustee

Sometimes a trustee’s lackluster performance has nothing to do with malice, scheming, or manipulation. Sometimes lackluster performance comes from an innocent place, and when it does, it’s referred to as an incompetent trustee. Unlike the above reasons, which carry criminal consequences for the guilty, incompetence is best settled through mediation (more on mediation below).

Illegitimate Reasons for Trust Litigation

Just as trust litigation becomes necessary under select conditions, select conditions nullify the ability to litigate a trust:

  • Disinheritance. A grantor’s decision to disinherit or prevent a beneficiary from receiving assets after the testator’s death, is hurtful, but ultimately not a qualifying reason to litigate a trust.
  • Trustee’s fees, gleaned from hiring professional fiduciaries and other professional third parties. Trustee’s fees naturally take away from and decrease inheritance amounts, and therefore cannot be used as grounds in a trust litigation suit.

The Trust Litigation Process: What to Expect?

Lawsuits are subject to their fair share of misconceptions, and misconception is the enemy of the adequate emotional, logistically, and financial preparation lawsuits require.

Below is an eight-step overview of the trust litigation process. Note that timelines may vary on a case-by-case basis.

1. Investigation and Research

Long before arriving in the courtroom, your legal representative will gather evidence and assess whether you have a viable trust litigation case (a case likely to win in court). Common evidence for trust litigation cases includes the following:

  • Communications, such as letters, text messages, and emails from involved parties.
  • Witness information, such as names, contact details, and meeting logs.
  • Descendant information, such as names, contact details, and meeting logs.

The research phase typically contains two prongs, an initial consultation, where you provide a brief overview of the case with a legal representative, and a longer meeting, where you flesh out the full story with a legal representative.

2. Pleading

After the client’s trust litigation story is assembled, their legal representative files it with the applicable probate court (and other necessary parties). This is called the pleading. The initial pleading is called the “petition” and the person filling it is called the “petitioner”. 

The petition informs the probate court that the petitioner is entitled to money, damages, or other forms of compensation because of the trust litigation.

The probate court is not the only entity that receives a petition. All interested parties receive it as well, in the form of a Notice of Hearing, either via mail or by hand. The Notice of Hearing informs the interested parties of the date and time of the first hearing.

From there, recipients may respond to a petition with either a “response”, opposition or consent, or an “objection”, opposition. 

3. Discovery

After the response or objection has been filed, the trust litigation process moves into the discovery stage. 

As a pivotal point, the discovery stage is a legal procedure where both sides “discover” relevant facts in preparation for the trial. There are two categories of tools used in the discovery stage:

  • Written, which include interrogatories (written questions and answers from either side), requests for the production of documentation, requests for admission (true statements), and subpoenas.
  • Oral, which includes depositions or in-person interviews with parties involved in the case, and oaths.

4. Mediation

Trust litigation can escalate into multi-year affairs. To provide a release valve for escalation, a probate court may facilitate a resolution to the dispute. This bargaining process is called mediation.

5. Expert Witness Depositions

The trust litigation process escalates to expert witness depositions if a resolution isn’t reached during the mediation stage. Testimonies are provided by expert witnesses, such as medical and psychiatric providers, who have a record of working with the testator. 

6. Trial Preparation

Preparation for a trial is the next stop after expert witness depositions, where legal representatives work diligently on the trial’s many moving parts. These parts include drafting opening and closing statements, preparing direct and cross-examinations, evidence, trial binders, and witness testimonies.

7. Trial

Save for trust litigation cases that involve elder abuse and other criminal activities, trust litigation cases are typically heard before a sole judge instead of a jury.

The trial phase doesn’t guarantee an instant verdict, as trials could take several weeks to several months. Trial duration also depends on the judge’s, witnesses, courtroom, and your legal representative’s availability.

8. Post-Trial Decisions

A verdict, or the formal finding on the case made by the judge after trial, doesn’t indicate a trial’s conclusion.

In Colorado, post-trial motions may be filed up to 14 days after a verdict is reached, and a new trial or appeal may be required or requested by either the winning or losing party.

Contact us to schedule your initial consultation.