Trust and will disputes are confusing because the way you see your family and their assets can be very different from how the law sees it. You may see your family as one group of people related by blood. If one of your siblings is taking advantage of your parents, then you should be able to step in and help protect them. Or if your parents pass away and their assets are not being distributed according to your parents’ desires, then you should be able to place all the assets in a big pile and force a proper distribution among your family members.
Well not so fast. The law makes things complicated because it does not see these issues as a “family” problem. Instead, the law sees individual people, each with their own set of rights—some rights being enforceable now and some being enforceable later (if at all).
For example, if a parent is being controlled by one sibling and that sibling has taken control of the parents’ trust, you cannot simply demand a Trust accounting from the bad brother or sister. Why not? Because you do not have a current right to do that. When a parent creates a revocable Trust the Trustee only owes a duty to the Trust creator (called a Settlor—i.e., the parent). Therefore, only a parent can demand an accounting from the Trustee—no one else has that right and no one else can enforce the parents’ rights. The exception is if a conservator is appointed on behalf of the parent, then the conservator can exercise the parent’s right and force an accounting from the Trustee. Once the parent dies and the children become vested beneficiaries of the Trust, then the children can demand an accounting (including an accounting for the period while the parent was still alive).
It may seem like a family matter to you when a sibling is wreaking havoc with a parent, but the law sees individual people with individual rights—not a family matter.
The same is true for disputes over a parents’ assets after they die. You may see a pile of assets your parents owned while they were alive, all of which they controlled and benefitted from. Things like their home, joint bank accounts, life insurance, retirement accounts, brokerage accounts, bank accounts, CD’s, etc. If your parents owed all of these assets then you should be able to deal with them in a single action, just pile them on the table and let the dispute begin. (See our previous discussion on how assets pass at death.)
But after death, the law sees assets very differently. The law places each asset in its own box that is governed by its own set of rules. The assets titled in the name of a Trust pass under Trust law, but they have nothing to do with assets passing by beneficiary designation—like life insurance and retirement accounts. And joint assets pass under their own law, which is different from assets held in an individual’s sole name, which passes under a Will as part of the probate estate.
Filing a Trust contest will help to undue assets passing under a Trust, but it does nothing for assets passing by joint tenancy or beneficiary designations. So all those life insurance proceeds and retirement accounts have to be contested in different legal actions. It is not uncommon to have a Trust contest petition, a Will contest petition, and a third type of probate petition all in a single matter.
Why is this all so confusing? Thanks to a few centuries of legal evolution where people came up with new and exciting ways to side-step Wills and the probate process. Things like Trusts, joint tenancy, and beneficiary designations were meant to make passing assets easier. That may be true when a parent plans out their assets ahead of time. But when things go astray and assets have been wrongly distributed, this maze of laws governing different types of assets can be a difficult obstacle to overcome.
So beware, family issue involving Trusts and Wills are far more complicated than they appear.