One of the main reasons people create a family trust is to avoid probate. Why do they not always work out as expected and actually end up in probate court?
First reason: the family tried to save money by doing it themselves and not hiring an experienced lawyer. Trust documents must include certain elements and the trust may be legally unenforceable if the required language is not included. Failure to appoint a successor trustee (who will manage the trust when the original trustee is unwilling or unable to act) may require court intervention to appoint such a successor trustee.
Reason 2: The appointed trustee is not fulfilling the obligations imposed on him by the terms of the trust. The trust may require that certain income or the principal of the trust be paid to a person (beneficiary), but the trustee does not have the know-how to accomplish this task. If the trust has not appointed a successor trustee, a petition may need to be filed with the court to appoint another qualified trustee to act.
Third reason: the trustee commits a fiduciary abuse by misappropriating the assets of the trust. Unfortunately, this happens far too often. A trustee has one primary duty: to do exactly what the trust tells them to do. Unless the trust grants specific permission, a trustee has no legal right to use trust assets for personal gain.
But an unscrupulous trustee can take advantage of the family trust, for example, by withdrawing and pocketing money from a bank account belonging to the trust. Such a dishonest trustee can mortgage a house owned by the trust and pocket the loan money. When such wrongdoing is discovered, the case may need to be taken to court to evict the thief, seek reimbursement and appoint a new trustee.
Fourth reason: undue influence on a mentally incompetent trust-giver. The trustee is the person or persons who contributed assets to the trust and decides who will receive the assets of the trust upon the death of the trustee. As the years pass and the trust giver ages, their mental capacity may diminish to the point where they are susceptible to undue influence.
An unscrupulous caregiver or friend may intentionally manipulate the elderly trustee to modify the trust to add the caregiver/friend as a beneficiary and disinherit the beneficiaries originally named by the trustee. If this happens, the case must be taken to court to invalidate the inappropriate changes that have been made to the trust.
Fifth reason: the trust was never funded. For a trust to be valid, it must own something. Many do-it-yourselfers neglect to identify the assets that will belong to their trust. Upon the death of the trustee, the beneficiaries may learn that title to the home never passed into the trust.
In Riverside County, California, for example, failure to create a trust deed to a home may not be fatal to the validity of a trust. If such a deed was never prepared and registered, but the trust document itself listed the house as trust property, a petition for probate can be filed to have the court recognize the house as trust property. trust and thereby avoid full probate. case. In this scenario, a probate court petition still needs to be filed, but the trust remains valid and the costly and time-consuming probate process is avoided.
These are just a few of the main reasons why trusts don’t always prevent you from appearing in probate court. However, a properly prepared and executed trust document is still the best way to avoid probate.