What to do about a family trust and community property?

A family living trust was created 8 years ago and contained all community property. Another trust was created 6 years later, after one of the parties was suffering from dementia. An IRA from the original trust was removed and distributed to one side of the family. Can the second trust be overturned since one of the parties had diminished capacity and was unable to know what she was signing? And can the parties who received distributions (possibly illegally) from the IRA be forced to return the funds to the trust?

Asked on September 21, 2012 under Estate Planning, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

IF at the time the trust that you have written about one of the trustors to it was suffering from dementia and was not mentally capable of understanding the legal effects of what he or she was signing the trust whether it is a revocable or an irrevocable trust could be rescinded.

However, proving such lack of capacity is on the person seeking to overturn the trust. Assuming the trust is overturned, then those parties that received distributions would normally be required to return what they received back to the trust.


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