Trust Construction Disputes

Trusts are set up and governed by the terms of a trust instrument. If the terms, or the meaning of the terms, in a trust instrument are unclear, ambiguous, or contradict each other, trust lawyers can submit the trust to the Surrogate’s Court for construction or interpretation. Unlike a trust contest, a trust construction proceeding focuses on the meaning of the trust terms; however, its validity can also be considered. If you have questions about trust construction disputes, you should contact New York City estate litigation attorney Jules Haas for a consultation.

Trusts are legal arrangements under which a grantor transfers property and designates it to be managed by a trustee for the benefit of others who are beneficiaries. The trust instrument created by the grantor dictates the terms under which the trust is to be managed. For example, a trust could provide that a beneficiary will only receive a distribution at age 22 if she graduated from college. Sometimes grantors serve as trustees of their own trusts, and name somebody to take over after they pass away.

The trustee owes a fiduciary duty to the trust’s beneficiaries; a fiduciary duty is an extremely high standard of care. Trustees are supposed to use reasonable care, caution, and skill to make and implement trust management and investment decisions as a prudent investor would, taking into account the terms, provisions, and purposes of the governing trust instrument. While the trustee is the legal owner of the trust with the power to administer its assets, she only does so for the beneficiary’s benefit.

Sometimes trust terms are murky or ambiguous, resulting in disputes between the trustee and beneficiaries about what the settlor intended and how the trust should be managed. There are also situations in which a trustee has discretion about distributions provided to beneficiaries, based on changed circumstances. This situation can also yield disputes regarding how the trust should be interpreted.

Like will construction, the purpose of a trust construction is to ascertain and give proper effect to a settlor’s actual wishes and intent. In a trust construction proceeding, the court examines and determines the testator’s intent as expressed in the words of the trust instrument. There are other situations in which the court may construe a trust. For instance, trust construction could occur in a trust accounting or probate proceeding.

When a grantor’s intent as expressed in the trust instrument is clear and unambiguous, the court is not supposed to reach further than the plain language of the instrument. However, if the trust language is ambiguous, the court will try to determine the grantor’s intent and then carry it out. Intent is determined by looking at the trust in its entirety and considering all the facts and circumstances under which its provisions were created. Intent can’t be determined only from a single word or phrase, but needs to be read in context.

When there’s an ambiguity in trust language and it isn’t possible to ascertain the intent from the language, it is possible to bring in extrinsic evidence of intent. Extrinsic evidence is evidence outside the written instrument. For example, a trust could include an ambiguous incentive provision to encourage a particular behavior, and interpreting that provision might require the court to call a witness to testify or provide a statement about what was intended by the incentive provision. However, where the terms of a trust are clear and ambiguous, extrinsic evidence cannot be used to contradict the clear terms.

In addition to possessing the power to interpret ambiguous terms, the court also has the power to strike terms. The court can reform trust terms even if they are unambiguous to conform them to the grantor’s intentions if the grantor’s intention and the specific terms were impacted by a factual or legal mistake and these are proven by clear and convincing evidence. The court is also empowered to declare a trust invalid.

Interpretation of a trust’s terms in New York City can have a big impact on distributions and other matters. Attorney Jules Haas can help you with handling trust construction disputes. Mr. Haas has represented and counseled trustees and beneficiaries in estate litigation for over three decades. He represents people in Manhattan, Queens, and the Bronx, along with Suffolk, Nassau, Westchester, Kings, and Richmond Counties. Contact us at (212) 355-2575 or via our online form.