Many Indiana residents include trusts in their estate plans to reduce their estate tax exposure, give them more control over how and when their assets will be distributed, and help to avoid probate. Trusts are flexible and useful estate planning tools, but they can be challenged in certain situations. Parties that could challenge a trust include the trust’s beneficiaries as well as heirs who believe that they should have been named as beneficiaries but were not.
Challenging a trust
Trust challenges must be filed in probate court, and the party making the challenge must have good reasons for doing so. Being unsatisfied with the provisions of a trust or objecting to a beneficiary designation would not be considered sufficient grounds for a challenge. Instead, the challenging party must establish that the trust is deficient in some way. A trust could be successfully challenged if the petitioner is able to establish that:
- The grantor was not of sound mind when they created the trust
- The grantor was under duress or undue influence when they created the trust
- The trust documents were forged or altered without the grantor’s consent
- A trustee is mismanaging the trust for their own benefit
- The trust was invalidated by a new trust
No contest provisions
Some people include no contest provisions in their wills or trusts to deter beneficiaries from challenging them. The Indiana Code was revised in 2022 to allow no contest provisions, but they can only prevent beneficiaries or heirs from receiving assets when their challenges are unsuccessful. If a probate court determines that a trust challenge is based on solid legal grounds, a no contest provision would be unenforceable.
One of the reasons why people create estate plans is to prevent disputes between their heirs. To avoid challenges, individuals should make sure that their trusts are drafted correctly and choose their trustees with care. They should also communicate with their beneficiaries to prevent misunderstandings that could lead to litigation.