People in North Carolina often establish trusts during the estate planning process. Trusts are legal entities that own and manage assets. One of the main advantages of a trust is that it protects a person or entity’s valuable assets. However, there are instances when trusts and trustees can be targets of lawsuits.
What are trusts?
Trusts are legal entities often used in the estate planning process. There are two types of trusts: revocable and irrevocable trusts. A revocable trust allows for the transfer of assets. However, asset transfers are permanent with irrevocable trusts.
Is it possible to sue trusts?
In most cases, suing a trust directly is impossible. That’s because trusts function as legal entities, meaning there’s no specific person to sue. But, in certain situations, it’s possible to sue a trust’s trustee. It is also possible for a creditor to sue the creator of a revocable living trust, as the creator still has control over the trust’s assets.
Valid reasons to sue trustees
A trustee is a designated person in charge of a trust and its assets. This individual has a fiduciary duty to act in the best interests of a trust’s grantor and this person’s beneficiaries. Unfortunately, trustees don’t always follow their obligations to work in the best interest of all other parties.
Here are several valid situations that could allow you to sue a trustee:
- A trustee won’t explain the withholding of assets.
- A trustee appears to favor certain family members over others.
- The trustee was negligent and financially harmed beneficiaries or the trust itself.
- You believe there’s a clear conflict of interest between a trust and its trustee.
If you believe there’s something illegitimate happening with a loved one’s trust, you can potentially sue or contest this legal entity. Suing a trust is an attempt to seek damages—contesting trusts means challenging a trust’s terms.