Can a Trust Be Contested in Arizona?
18 Mar Can a Trust Be Contested in Arizona?
Setting up a trust is often a crucial step in estate planning. Whether they are revocable or irrevocable, trusts are designed to ensure the smooth transfer of assets to their beneficiaries. But what happens when the trust instructions don’t seem to align with the grantor’s wishes? What if your grandfather made an amendment after a dementia diagnosis? What if your elderly aunt always promised you’d get everything, but then it all went to her caretaker without warning? Can the trust be contested?
Yes, a Trust Can Be Contested in Arizona
Arizona law does allow trusts to be challenged under certain conditions. Whether due to suspicions of undue influence, fraud, lack of capacity, or other legal grounds, the beneficiaries and heirs of the deceased have the right to challenge its validity.
For example, if you suspect that your aunt’s caretaker convinced her to disinherit you, you may be able to contest the trust on the grounds of undue influence. It is also possible to contest a trust amendment without contesting the trust itself. So if your grandfather’s final amendment seems out-of-character, you may be able to challenge it on the grounds that he didn’t have the mental capacity to change his trust.
Who Can Contest a Trust?
You must have legal standing in order to contest a trust in Arizona, which means you must have a financial interest in the trust. For instance, if you stand to inherit less with the trust as-is than you would if the trust were to be invalidated, then you have legal standing. Legal standing typically applies to beneficiaries and heirs of a trust. If they were disinherited from a trust that previously included them, left out of it from the start, or will receive less than expected, they can contest it.
Reasons a Trust Can Be Contested
1: Lack of Capacity
One of the conditions of setting up a valid trust or trust amendment is that the grantor must be of sound mind. A trust can be contested in Arizona if there are claims that the grantor lacked the mental capacity to comprehend the consequences of establishing or amending a trust. For instance, say your grandfather was diagnosed with dementia. He later amended his trust to include a family member he hadn’t spoken to since before the diagnosis, leaving you with a smaller inheritance. It could be argued that this change was made under mental incapacity, and you would have legal standing to challenge the amendment.
2: Undue Influence
Contesting a trust based on undue influence can happen in situations where another party manipulates the grantor into creating or amending a trust so that it disproportionately favors themselves. For example, if your elderly aunt’s caretaker manipulated her emotionally and coerced her into changing the trust to disinherit you, then you would have grounds to contest the trust. To substantiate such claims, evidence must be presented demonstrating coercion, threats, or other undue influences that compromised the grantor’s autonomy.
3: Fraud or Forgery
Trust can also be contested because of fraudulent actions or forgery during the creation or execution of the trust. If there is evidence of misinformation, deceptive practices, or forged signatures within the trust documents, interested parties may contest the trust. For example, if someone forces your parent’s signature on the trust documents or convinces them to sign it even though they don’t fully understand the consequences, you may be able to contest the trust.
4: Trust Language Ambiguity
Clarity is essential in order to prevent fights over inheritances and to ensure a fair distribution of assets. Ambiguous language within the trust documents can lead to confusion and disagreements among beneficiaries. If a parent’s trust says “I leave all of my assets to my children” without naming names, but they have both stepchildren and biological children, there may be disputes over the parent’s intentions. Contesting a trust due to ambiguity involves deciphering vague terms, resolving conflicting distributions, and interpreting the grantor’s intentions.
5: Errors in the Trust Document
Contesting a trust may be warranted if there are errors in the document’s execution. For example, if there are typos such as misspelled names or incorrect addresses, it could affect the distribution of assets. If you’re unable to legally inherit assets in a trust due to errors, then you would have standing to contest the trust.
6: Breach of Fiduciary Duty
A trustee has a fiduciary duty to act in the best interests of the trust and its beneficiaries. But if the trustee starts using the trust funds for personal expenses, then they have breached that duty. Contesting a trust on the grounds of breach of fiduciary duty requires demonstrating the trustee’s negligence, misconduct, or failure to fulfill their obligations.
How Long Do You Have to Contest a Trust?
If you are interested in contesting a trust, it is crucial to act promptly. According to Arizona Revised Statute 14-10604, there are two different windows of time in which you can contest a trust—either one year after the grantor’s death, or four months after the trustee sent you a notice of the trust’s existence along with a copy of the documents.
The Process of Contesting a Trust in Arizona
Contesting a trust in Arizona is a legal process that typically takes place in probate court. Typically, the process includes the following steps:
1. Compiling Evidence
First, you must compile evidence to support your claim. This may include the trust grantor’s medical records, previous versions of the trust, or testimonies supporting the implication of undue influence, fraud, or mental incapacity.
2. Contacting Interested Parties
It’s a good idea to contact other heirs and beneficiaries who may also be interested in contesting the trust. This can help you gather more information and strengthen your case.
3. Drafting the Petition
You will need to draft a petition that outlines your grounds for contestation and provides supporting evidence. It’s a good idea to work with a lawyer to ensure that your petition presents a strong case.
4. Filing the Petition
Finally, you’ll need to file a petition with the probate court. All interested parties will then be notified, including the beneficiaries and trustees. They will then have the opportunity to respond to the allegations and present their case.
What Happens If the Trust is Successfully Contested?
If the court deems a trust to be invalid, then the trust will be terminated. Unless the will describes how to transfer assets outside of the trust, then the assets will be distributed according to the laws of intestate succession. This means that only people related by blood to the grantor would receive their assets.
Create or Amend Your Own Arizona Trust
Working with a professional estate planner will ensure that your trust has clear language and accurately reflects your wishes, minimizing the risk of contestation. If you need to set up a trust or amend an existing document, don’t hesitate to contact the Phelps LaClair team. We’ve been helping Arizonans with estate planning for over 40 years. Call us at 480-892-2488 today to schedule an appointment at one of our convenient locations in the Phoenix area.
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