In Alaska a trust is an estate and financial planning tool. It is a legal entity that hold assets for the benefit of others. The person who creates the trust is referred to as the grantor. The person who benefits from the trust is the beneficiary. The person who manages the trust according to the terms of the trust document is the trustee. A trust can have multiple beneficiaries and can have multiple trustees. In Alaska, a trust must be registered. AK ST § 13.06.005. The trustee can be an individual or an institution. In Alaska, the Superior Court has jurisdiction over trusts. AK ST § 13.06.050(8).
Trust litigation refers to legal disputes over a trust. Trust litigation is not uncommon. With trusts, money and other types of valuable assets are involved as are family members. This mixture can set the stage for highly contentious, emotional disputes. Disputes could occur between the different the trustee and beneficiaries or among beneficiaries. Disputes between outsiders and the trustee can also lead to trust litigation. For example, there may be someone who believes that they should be included as a beneficiary.
Trustees and Fiduciary Duty
A trustee has a fiduciary duty with respect to a trust. This means that the trustee has a legal responsibility to manage the trust in the best interests of the grantor and the beneficiaries. Failure to do so would mean that they have breached their fiduciary duty. Breach of fiduciary duty is one of the most common types of trust litigation.
Trustees are required to:
- Invest trust assets prudently
- Carry out the grantor’s instructions as memorialized in the trust agreement
- Treat beneficiaries fairly and not show favoritism
- Make appropriate and timely distributions based on the instructions in the trust document.
- Keep detailed records and consistently send reports to beneficiaries
Types of Trust Litigation Cases
Trust litigation falls under the general umbrella of probate disputes. Probate disputes involve any legal dispute associated with the administration of a person’s estate or the validity of a document related to their estate planning, such as a living will or a power of attorney. While breach of fiduciary duty is a common type of trust litigation, it is not the only type. Other reasons for trust litigation include:
- Validity of trust. If someone believes that that trust was is not valid, they can challenge it in court. For example, an allegation of undue influence means that the person who created the trust was illegally influenced or pressured to include certain beneficiaries or provide for the distribution of trust assets in a particular way. A challenge to a trust could also be based on questions about the competency of the grantor or allegations that the document was forged.
- Ambiguities in trust document. If there are ambiguities in the trust document, a lawsuit may be brought requesting the court to determine how to interpret the language.
- Disputes between trustees. When there are co-trustees, they may disagree on issues related to managing the trust, distributions, and even their fees.
However, these are just a small sampling of the type of probate disputes that might wind up in court. Other types of trust litigation involve disputes among beneficiaries, disputes related to second marriages and children born outside of the marriage. Furthermore, in addition to trust disputes, there other types of estate litigation includes breach of fiduciary duty cases, will contests, conflicts associated with non-taxable and taxable gifts, citation proceedings and contested claims over recovering assets, accountings, arbitration and mediation, appeals, charitable pledge disputes and closely held business interests contested issues.
Note that in order to initiate trust litigation, the petitioner must be an interested party. This generally means that only a trustee, a grantor, or beneficiaries have standing to initiate litigation. However, in some instances the grantor’s heirs who are not trust beneficiaries and creditors may also have standing to initiate trust litigation.