Trust is a powerful estate planning tool if you want to avoid probate and safeguard your loved one’s future. However, for a trust to serve its intended purpose, it must be valid.
A trust, like any other legal document, can be contested by your dependents, or anyone, on any of the following grounds:
Lack of testamentary capacity
Testamentary capacity is the legal and mental competence to create a valid trust. Basically, you must be an adult of sound mind to create a valid trust. This means that:
- You can comprehend the nature and extent of your assets
- You can clearly identify parties to the trust (the trustee as well as your beneficiaries)
- You understand the type, purpose and effect of the trust you are creating
If you create your trust while suffering from a degenerating condition like dementia, there is a likelihood that someone will contest the document.
Fraud and your trust’s validity can take a number of dimensions. First, fraud can happen when someone falsely claims that you created a trust when you did not. In this case, they may produce a fraudulent trust with forged signatures.
Fraud can also happen when someone (usually the trustee) changes some of the provisions in your trust or steals from the trust.
Breach of fiduciary duty
When you create a trust and appoint a trustee, they must follow the rules you set out and act in the interest of you and the beneficiaries. This is referred to as a fiduciary duty. If the trustee violates their fiduciary duty, your beneficiaries may initiate legal action against them.
A trust offers several benefits to the settlor and the beneficiaries. Find out how you can protect your rights and interests while creating a trust.