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Suing a Trust in Federal Court

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Trusts are ordinarily a matter of state law. They are created under the laws of a state. That would normally mean that to sue the trust, you have to go to the courts of the state it was created in. However, there are times when it might be better to sue a trust in federal court.

This might happen if the plaintiff is from out of state and has a legitimate fear that the state courts will favor the trust and its local trustees.

The Wills, Trusts & Estates Prof Blog wrote about one such case in "Trustee Citizenship Regulates Federal Diversity Jurisdiction."

The plaintiff was a citizen of Taiwan suing a trust that her ex-spouse set up. She was seeking to recover assets from it. While it is not clear why she did not want to sue in state court, she did choose to file suit in federal court.

However, federal courts have limited jurisdiction. Not every case can be heard in federal court.

One way to get jurisdiction in federal court is called diversity jurisdiction. In order for it to apply, the plaintiff and the defendants have to be residents of different states or countries. In this case, the court decided that diversity jurisdiction was appropriate because the trust was a traditional trust not capable of suing or being sued on its own.

The citizenship of the defendants was thus the home states of the trustees.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 14, 2016) "Trustee Citizenship Regulates Federal Diversity Jurisdiction

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