How to Contest a Trust in Iowa
How to Contest a Trust in Iowa
People have several options regarding leaving their assets and possessions to others after death. Many are familiar with the concept of a will, which outlines a person's wishes for their assets. A will takes effect after a person dies. It moves through probate court and becomes part of the public record.
A person can also create a trust to dictate how they want their assets to be distributed. While some trusts take effect after a person's death, others—called living trusts—may be effective while an individual is still alive. One of the benefits of a trust is it skips probate, so beneficiaries and heirs may get access to their inheritance faster.
Although trusts ideally reduce conflicts over a person's estate, issues can still arise. Iowa trust law allows a person to contest a trust under certain circumstances.
What Happens When a Trust Is Formed?
A trust legally protects the trust creator’s—or trustor's—assets. The trust ensures assets are distributed as the trustor wishes. When the trustor creates a trust, they must assign a trustee. A trustee can be an individual or an institution, such as a bank or law firm.
A trustee is responsible for holding and distributing assets as the trustor wishes. Distribution is for the benefit of the trust's beneficiary or beneficiaries. In some cases, the trustor can also be the trustee.
A trust transfers ownership of assets from the trustor to the trust itself. After writing out a trust agreement, the document dictating management and distribution schemes, the trustor generally opens an account, such as a savings or investment account, and transfers their financial assets into that account. The account is titled in the name of the trust, not the trustor. However, if the trustor serves as the trustee, they still have access to the entirety of the assets. Depending on the type of trust, the person who created it can still use the assets in the account while they are alive.
What Are the Types of Trusts in Iowa?
Multiple types of trusts exist, but some are more common than others. Generally, trusts can either be irrevocable or revocable.
Sometimes called living trusts, a revocable trust lets the trustor retain control of trust assets while they are still alive. The trustor can be the trustee of a revocable trust while they are alive. Usually, they name a person or institution to succeed them as trustee after their passing or if, for any reason, the trustee is no longer able to continue trustee duties.
A living trust can dissolve if needed while the trustor remains alive. For example, if a person has a sudden change of circumstances and needs to use all the assets in the trust, they can do so.
After the trustor's death, revocable trusts become irrevocable. They avoid the probate process but are usually subject to estate taxes.
While revocable trusts offer some degree of flexibility, irrevocable trusts are generally set in stone. Once an irrevocable trust is created, the trustor transfers ownership of their assets to the trust itself.
When a trustor creates an irrevocable trust, they must still choose a person or institution to act as the trustee. The trustee is responsible for distributing the trust's assets as the trustor wishes. The trustor gives up their rights to the assets and puts full and final faith in the trustee.
Since the trust now owns the assets, the assets are no longer part of the trustor’s estate. Following the trustor’s death, the trust skips the probate process and is not subject to estate taxes. Establishing an irrevocable trust also protects a trustor’s assets from creditors and may help a trustor qualify for government programs that have asset or income limits.
Living vs. Testamentary Trusts
A trust can be a living trust, meaning it is created and in effect during a person's lifetime. Another type is a testamentary trust. If a person specifies a testamentary trust in their will, it goes into effect after their death.
A testamentary trust often outlines specific conditions that must be met before a trustor's assets are distributed to the beneficiary. For example, the trust might require the trustee to maintain control over the assets until the beneficiary reaches a certain age or achieves a specific milestone in life, such as getting married, graduating from college, or having a child.
While a living trust avoids probate, testamentary trust assets must usually move through the probate process before being transferred into the trust.
Can a Trust Be Contested in Iowa?
Iowa trust law allows you to contest a trust on certain grounds. A claimant’s chance of successfully contesting a trust depends largely on the reason for the contest. For example, you can contest a trust if you disagree with it, but the court will likely deny your request in that case.
More valid reasons for contesting a trust include:
- You suspect fraud: A fraudulent trust may not be valid and may be contested. You can contest a trust for fraud if you believe the trustor believed they were signing something else or if the trust changed after the trustor signed it.
- You believe the trustor wasn't of sound mind: Ideally, a trust will go into effect or be written while the trustor is of sound mind. But that doesn't always happen. If you can prove the person did not understand what they were doing when they created the trust, you might be able to contest it successfully.
- You believe the trustor was pressured into creating the trust: A trust should be created freely and be based on the trustor’s goals. If you can demonstrate the trustor was pressured into making the trust, creating the distribution scheme, or naming a certain trustee by someone, such as a beneficiary, you might succeed in contesting it.
What Are the Chances of Successfully Contesting a Trust in Iowa?
Your chances of success when contesting a trust depend largely on the strength of your evidence. The burden of proof is on the person contesting the trust. The more evidence you have that the trust was created under pressure, influence, or incapacity or is fraudulent, the stronger your case may be.
Contact the Trust Litigation Attorneys at Whitfield & Eddy for More Information on Contesting a Trust
If you want to contest a trust, you need a legal team that is knowledgeable of and experienced with Iowa trust law. The trust litigation attorneys at Whitfield & Eddy can provide you with professional legal counsel when contesting a trust.
Feel confident with our qualified trust litigation attorneys at Whitfield & Eddy. Contact us today to schedule a consultation.