No matter what your goals are for your trust, it needs to be administered by someone. Trust administration involves investment management, implementing charitable giving strategies, risk management, insurance and business succession planning, when applicable. The trustee you choose to manage your trust and its administration will be responsible for fulfilling the terms of the trust. There are situations where the trust agreement may be challenged. In those cases, having the assistance of trust administration attorneys can be helpful.
What is the definition of a trust?
Trusts are actually fiduciary agreements between the grantor and the trustee, who is the person making the trust. Fiduciary basically means the agreement is formed on trust and confidence. The trust document provides the necessary authority to the trustee to manage the trust assets and distribute them to the named beneficiaries. This must be done pursuant to the terms of the trust agreement. A trust can be used in place of a will, or in conjunction with a will when it only applies to certain property. It is best to obtain the assistance of trust administration attorneys in drafting a proper trust agreement.
What does trust administration involve?
Regardless of your trust goals, your trust will need to be administered, which involves investment management, implementing charitable giving strategies, risk management, insurance planning and business succession planning, when applicable. The trustee you select to manage your trust and its administration will be responsible for carrying out the terms of the trust.
Setting aside a trust agreement
There are various ways to set aside a trust agreement and many different reasons for doing so. One way is by challenging the creation of the trust by arguing that the person who created the trust made a mistake with regard to the trust. This is a similar concept to that found in contract law — non est factum. The term essentially means “a written agreement is invalid because the person was mistaken about its character when signing it.”
When does the non est factum doctrine apply?
This doctrine applies in cases where there was both a mistake made in executing the contract and the party misunderstood the nature of the document that he or she was signing. In determining whether the doctrine actually applies, courts typically apply a two-step analysis. The first step is to determine whether the person signing the agreement was mistaken as to the nature and the substance of the document. Once that has been established, the second step is to decide whether the person was careless when signing the agreement. The person who raises makes this challenge to the agreement has the burden of proving it.
In what situations does the doctrine not apply?
Some courts have limited the application of this particular doctrine, especially in cases where the person is mentally competent and not under any duress. Put another way, the defense does not apply when the person who executed the trust was literate, there was no fraudulent misrepresentation and there was sufficient time given to read the trust agreement and understand its purpose and effect. This is true regardless of whether the party actually read the trust agreement.
Other issues to consider
Another important issue to consider in attempting to void a trust agreement under this legal theory is that the purported mistake must have related to the essential nature of the transaction at issue. In other words, there must have been a substantial difference between the agreement that was signed and what the person actually believed he or she was signing.
Also, arguing only that the person creating the trust did not have the assistance of trust administration attorneys is not sufficient to set aside a trust agreement. Every case is determined based on the specific situation involved.
Common goals of a California trust
As people amass their wealth, develop their retirement accounts, make their investments and purchase their assets, they are developing an estate with value. A properly drafted trust agreement can transfer those assets to the trustee in order to accomplish the specific goals, including protecting assets and ensuring they are distributed according to your plan, protecting your estate from unnecessary taxation and transfer fees, managing your affairs in case you become incapacitated, and assisting with charitable giving.
If you have questions regarding trusts, trust administration, or any other estate planning matters, please contact the Northern California Center for Estate Planning and Elder Law for a consultation. You can contact us either online or by calling us at (916) 437-3500. We are here to help!
Timothy P. Murphy
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