The way a trust contest is litigated depends to some extent on whether the trust under consideration is revocable or irrevocable. Slightly different trust contest standards are applied. There has been a trend to apply more will challenge law to revocable trusts and more contract law to irrevocable trusts, the theory being that revocable trusts are more of a will substitute than an irrevocable trust. Whether will contest standards or contract dispute standards apply to a particular trust would depend on the circumstances of each case.
For a revocable trust, a court is likely to apply will contest standards. Because New York courts view revocable trusts as will substitutes, they tend to apply the same standards as wills when revocable trusts are contested:
- Lack of Capacity – People who were elderly, weak or infirm are more likely to be shown to lack the capacity to make a trust in New York. The possibility of showing incapacity is greater for a decedent who was in the later stages of Alzheimers or Dementia, who was diagnosed with a terminal illness and who was under the influence of mind-altering medication. Here is more about lack of capacity. To overturn a trust based on lack of capacity, the challenger must show that the trust maker did not understand the following:
- The extent and nature of their property
- Their relationship to their relatives and other people affected by the trust
- How their trust is set up
- Undue Influence – To overturn a trust based on undue influence, the contestant has to show that the deceased was influenced into making the trust. When the trust beneficiary is in a relationship of confidence with the trust maker and the trust beneficiary benefitted from that relationship in the trust, the court infers that the trust beneficiary must have influenced the trust maker. It would be up to the trust beneficiary who is inferred to have unduly influenced the trust maker to show that the inference is wrong and no undue influence took place.
- Other Grounds – Trust contest grounds such as fraud, duress, forgery and undue execution can also be asserted, but they are less common.
For an irrevocable trust, the court is likely to apply contract standards. To show that the trust maker did not have the capacity to make a trust, the challenger an irrevocable trust in New York will have to show to the trust maker did not have the capacity to understand what a contract is and the consequences of the contract. To have consent to enter into the trust, the trust maker must have had the mental capacity to understand what the trust does, and must have acted voluntarily, without threats of force.
- Advantages for the defender of the irrevocable trust – A challenge based on undue influence would not be as effective in an irrevocable trust, because undue influence tends not to be considered in contract law.
- Advantages for the challenger of the irrevocable trust – A challenge based on mental incapacity could be slightly more effective in an irrevocable trust. Irrevocable trusts tend to be more complicated and harder to understand. Even their element of irrevocability itself is something that is hard to process for a person with diminished capacity.
Less capacity is required to make a will than is required to execute other legal documents or contracts (see Matter of Coddington, 281 App Div 143 , affd 307 NY 181 ). Using this logic, it is possible that an irrevocable trust requires a little more capacity than a revocable trust.
Trust contest law is still not settled. It is not as easy as one would think to describe how a trust contest works in New York, because our law involving trust contests is currently in flux. A legislative advisory committee and bar groups have attempted to develop a unified approach to trust contest, and that attempt has failed. The statutory law is scarce in its guidance, and court cases have been contradictory at times. Courts decide trust contests by relying of a mixture of will contest and contract law, with a wide difference of opinion abounding.
Trust contests are best brought in the Surrogate’s Court. A trust contest can be brought either in the Supreme Court (New York name for a regular court) or the Surrogate’s Court, the Court dealing with matters of the dead. We bring usually bring our trust contests in the Surrogate’s Court, for two reasons. First, the surrogate’s court is more likely to apply the will challenge standard, and we think that it’s a more favorable standard to the trust challenger. And second, because a trust challenge deals with the matter for the deceased, there’s a chance that the attorney defending the trust may try to transfer it to the Surrogate’s Court anyway, causing unneeded delay in trust litigation.
Watch out for hidden trusts. One of the confusing things about trust contests is knowing whether there is a trust in the first place. New York is a state that allows ultra-private trusts. For example, Florida requires a trustee to notify potential beneficiaries of the existence of a trust upon the death of the maker of the trust. Not so in New York. When a person dies in New York and leaves a will, the executor probating the will has an obligation to notify the relatives of the deceased person, even if they are not in the will. Not so with a trust. A person can die and his relatives may never even find out that the deceased left a trust that cut them out of their inheritance. This is something to keep in mind. If your relative died and it looks like they have no inheritance to leave to you, it may be possible that they’ve made a trust and have cut you out of it (or have simply transferred their property to someone else before they died).
When you don’t know if your relative made a trust, you can’t challenge the trust, since you don’t know if one exists yet. What we do for our clients is we open up an estate proceeding and appoint them as the administrator of the estate. That gives them the official New York certificate with the power to request information from banks, financial institutions and other entities. If our client finds that the assets of their deceased relative were transferred to a trust, our client can then bring a trust contest to try to claw those assets back into their deceased relative’s estate.
If you think that your loved one was taken advantage of when making the so-called “trust,” speak with a New York estate lawyer who is experienced in defending and prosecuting trust contests.
Albert Goodwin, Esq. is an estate lawyer who practices in New York. He can be reached at (212) 233-1233.