I’m a beneficiary of a trust. Can I contest it?

You’ve probably heard of a will contest: A beneficiary of a will or another party goes to court in an attempt to prove the will is invalid. There are several good reasons for doing so. A party might have access to a will that was written later than the one being probated. A beneficiary might argue that the deceased was not in sound mind when the will was written. There might be allegations that a caregiver pressured the deceased person into revising the will. Whatever the situation, attorneys for the disputing parties can resolve the issue out of court or seek a ruling from a judge.

Will contests aren’t exactly common, but they occur often enough that most people have heard about them. Far less common but still extremely important are trust contests.

When can a trust be contested? Who can contest one?

We are using the example of a testamentary trust because these certain other types of trusts take effect upon the death of the settlor – the person who created the trust. Whether you can challenge a trust while the settlor is still alive is a different issue.

People create trusts for a variety of reasons, but typically they are meant to set aside money for a certain purpose or for particular beneficiaries. They can have many advantages, such as minimizing estate tax liability and being administered outside of probate court.

It might seem that the rules for contesting trusts would be the same as those for contesting wills, but the two processes are somewhat different. Many of the questions to be answered are the same, but the rules differ about who is qualified to make the contest, the situations where the contest is allowed, and the statutes of limitation. For example, a trust contest can typically only be brought by a beneficiary of the trust, while a will could be contested by someone who believes they should have been a beneficiary.

The legal reasons for challenging a trust are quite similar to those for challenging a will, but they are not the same. Like wills, trusts can be challenged if the settlor was not of sound mind, did not understand the provisions, or otherwise lacked the legal capacity to create it. Also like a will, a trust can be appropriately challenged if the beneficiary suspects someone used duress, fraud or undue influence to get the settlor to sign the trust. Where lack of capacity, duress, fraud or undue influence are established, the court will probably invalidate the trust altogether.

Somewhat similar to wills, trusts can also be challenged upon evidence that the trust language is so ambiguous that the settlor’s intent is unclear. In cases like this the court could invalidate the trust, but is more likely to try to ascertain the settlor’s true intent and modify or reinterpret the trust in that light.

Trusts can also be challenged in light of current circumstances. For example, the trust may be underfunded, or economic conditions may arise which increase the relative cost of administration. If it costs too much to administer the trust, the beneficiaries may not receive much out of it. In other situations there may be terms in the trust itself that allow it to be extinguished by petition.

What if there is a no contest clause?

Sometimes wills and trusts contain terms meant to discourage people from contesting them. These “in terrorem” or “no contest” clauses typically say that if a beneficiary contests the will or trust, he or she will be forced to forfeit their share.

Don’t worry. While it is true that these clauses are legal in Michigan, a 2013 decision by the court of appeals held that just such a clause was not enforceable when the person challenging the trust did so in good faith and with reasonable cause.