At the end stages of your life, there are a lot of decisions that must be made about your finances and your healthcare—and you might not have the capacity at that point to make those decisions yourself. One study shows that roughly 70% of elderly adults facing serious medical illnesses in need of intervention lacked decision-making capacity.
On the financial side of the coin, an NIH study estimated that approximately 29% of adults aged 65 and older struggle with diminished decision-making, including financial decision-making—such as deciding how their assets are to be divided upon their passing.
For this reason, estate planning encourages you to make decisions now, when you are of sound mind and body, so there is no ambiguity later when you no longer have the ability to make sound decisions about your estate. However, your estate plan may run into disputed trust issues such as:
- Vague Wording or Unclear Provisions
- Conflicts Over Healthcare Proxies and Medical Directives
- Claims of Undue Influence and Lack of Capacity
- Trustee Mismanagement and Breach of Fiduciary Duty
- Excluded or Disinherited Beneficiaries
To avoid estate disputes and litigation surrounding these issues, MHPS’s estate planning team is here to walk you through these common issues and provide estate planning suggestions to minimize your risks.
Exploring—and Preventing—Common Disputed Trust Issues
Even if you have a will or trusts set up to outline what is to happen to you and your assets when you pass on, if there are any blind spots in your estate plan, disputes can still arise about anything from end-of-life healthcare decisions to inheritance plans, wreaking havoc on your family’s harmony and dragging your estate through lengthy, stressful, and potentially expensive court proceedings.
Issue 1: Vague Wording or Unclear Provisions
First off is one of the most common disputed trust issues. Lack of clear communication is the root cause of a large majority of family conflicts over estates. If your estate plan contains vague or ambiguous language or directives, your beneficiaries have plenty of room to misinterpret what and how much of your assets they and their fellow beneficiaries receive as stipulated in your trust.
If you want to avoid trust disputes as a result of vague, unclear, and ambiguous wording, you need to be especially precise in creating your estate plan and leave no room for error. Each of your beneficiaries should know exactly what they are getting, how much of it they receive, when they receive their inheritance, and any conditions for receiving it.
Our estate planning suggestions to head off these conflicts are to:
- Work with an experienced estate planning attorney to draft a clear, legally sound trust.
- Use precise language, especially regarding asset distribution and conditions.
- Regularly review and update the trust to ensure it reflects current wishes and legal standards.
- Consider including a “no-contest clause,” which discourages beneficiaries from disputing the trust by threatening disinheritance.
Issue 2: Conflicts Over Healthcare Proxies and Medical Directives
When you are nearing the end of your life, decisions will have to be made about the medical treatment you receive. Falling and breaking a hip, a prolonged struggle with Alzheimer’s, a vehicle accident that leaves you in a coma—there are countless medical issues that can lead to you being unable to make your own medical decisions in your old age, and they can strike when you least expect them.
In this case, there are two things you should do to prevent emotionally trying disputes among your loved ones about the care you need. First, you can use your estate plan to provide detailed medical directives. You can’t always account for every possibility—however, you can also use your trust to clearly designate a healthcare proxy—an individual you trust who is invested with a durable power of attorney to make medical decisions on your behalf.
- Clearly outline wishes regarding medical care in an advanced healthcare directive or living will.
- Provide specific guidance on life support, pain management, and long-term care to prevent disputes.
- Keep medical directives updated to reflect changes in medical conditions or preferences.
Issue 3: Claims of Undue Influence and Lack of Capacity
There have been numerous occasions in which relatives or caretakers have pressured elderly individuals into altering their estate plans to benefit them or exclude others. Often, elderly victims have little idea what they are actually doing—in legalese, they lack “testamentary capacity,” or the mental ability to understand the nature and extent of their property and how their will distributes their assets.
The legal term for this is “undue influence,” and if a loved one suspects it has happened to you, the dispute can put your family through a lot of stress. Perhaps you are being unduly influenced—or perhaps they just need a reason to justify their dissatisfaction with your choices.
To prevent either situation and avoid estate litigation around undue influence and lack of capacity, you can:
- Have a neutral third party (such as an attorney or medical professional) assess your mental capacity before signing estate planning documents.
- Maintain thorough medical records to document your testamentary capacity.
- Record video footage of yourself signing the trust to demonstrate your intent and mental clarity.
- Avoid making last-minute changes, especially when under pressure from a particular beneficiary, that can give the appearance of undue influence.
The possibility does exist, of course, that near the end of your life, you will indeed lose testamentary capacity. If this happens, both the individuals you select to have financial power of attorney or to act as healthcare proxies and individuals worried about undue influence can point to documentation of incapacity to safeguard your estate plan and ensure your wishes are respected.
Documentation of incapacity, which establishes a clear medical and legal record of your mental state at the time you create or modify your estate plan:
- Establishes a baseline of competency and can confirm whether you had the capacity to make informed decisions at a certain point
- Strengthens the validity of your trust and prevents bad actors from enforcing changes that were made under questionable circumstances
- Makes it easier to contest undue influence without causing a protracted trust dispute
- Supports legal protections like guardianships or conservatorships
- Triggers the activation of a healthcare proxy or power of attorney to put your financial and healthcare decisions in the hands of a pre-designated, trusted individual you selected when you were of sound mind and body.
Issue 4: Trustee Mismanagement and Breach of Fiduciary Duty
Beneficiaries who suspect something is afoot with the decisions made about your estate after you have passed on may point the finger at your trustee, accusing them of mismanaging funds, failing to distribute assets properly, or acting in their own self-interest rather than in the best interest of the trust. And they may be right!
A trustee is supposed to carry out the decisions you make about your estate as outlined in your trust, and as long as they have full control over the assets contained in your trust, they are legally required to use that power responsibly. Sometimes they don’t, though—and your loved ones may have to take them to court to have them removed as trustee and their wrongs made right.
Avoid potential litigation with these estate planning suggestions:
- Choose a trustee carefully—consider a neutral third party like a bank or professional fiduciary if family conflicts are likely.
- Require the trustee to provide regular financial reports to beneficiaries.
- Include clear instructions regarding trustee duties and asset distributions.
- Set up a system for trustee oversight, such as co-trustees or an independent trust protector.
Issue 5: Excluded or Disinherited Beneficiaries
Nobody likes being left out—but sometimes you have valid reasons to make sure a certain family member has no claim to certain assets. Whether a family member is fully disinherited or just given a smaller inheritance, though, it’s not surprising they might not be happy about it.
Inheritance isn’t like divorce—you’re fully entitled to an unequal or unfair distribution of your resources. The issue is that if you don’t have a well-explained, ironclad reason provided for your decisions, an excluded or unfairly treated beneficiary can contest the trust, arguing that their exclusion was done in error or under unfair circumstances.
Some ways to head off this dispute and avoid estate litigation are:
- Clearly documenting your reasons for disinheritance or unequal distributions in the trust. You could also use a separate letter of intent to explain the reasoning behind certain estate decisions.
- Providing a small inheritance to potential challengers along with a no-contest clause. Family members who receive no inheritance at all have nothing to lose by challenging a will, but if they receive a small inheritance, they will lose it all if they challenge a trust in court and fail.
- Having multiple witnesses and a video recording of you affirming your decisions to head off challenges.
MHPS Law: Your Partners in Building a Better Estate Plan
With proven expertise in Tennessee estate law and a commitment to caring, compassionate service for all our clients, our Nashville-based team is here to help you create and maintain estate plans that minimize your risks of disputes and litigations. Catch disputed trust issues before they can happen and avoid family conflict with our estate planning expertise—reach out to our team for a consultation today.
