Preventing Trust Litigation

 

 

by Judy S. Bae, J.D. 

Parents commonly tell their children, "Be nice to your brother/sister" and "Share your toys.” But what happens when the children are now adults, their parents are no longer there to play referee and it is time to distribute the parents’ assets from their trust?

Over the past several years, I have litigated numerous trust battles where siblings have fought over real or perceived unequal distributions from their parents’ trust. Some cases have involved fights over how personal effects are to be distributed, i.e. who gets Grandma’s china or silver service. A more common scenario is where there is an unequal distribution of the parents’ assets – either where one child receives more than the others or a child has been disinherited. Trust litigation is often fueled by emotion but involves disputes over money.

Ironically, money does not heal emotional wounds and cannot provide answers from the dead. Since Mom and Dad are no longer present to police their children, there may no longer be a need to "be nice” to your sibling. Sibling rivalry is a facet of family life; however, it takes on a life of its own in trust litigation cases.

There are a few steps that can be taken to avoid unnecessary litigation amongst family members. Although you, as a parent, will not be around to smooth your children’s ruffled feathers, precautions can be taken to prevent future family discord.

1) Communicate your wishes. As the old adage goes, communication is key to good relationships; it is also essential in preventing litigation. Be clear with your children/heirs about your plan, especially if you are providing for an unequal distribution or if you are choosing to pass your assets to someone other than family or to a charitable organization. If you have decided to provide a greater share to the child who has sacrificed his/her own time and lifestyle to take care of you, express this to your family. When you have decided to disinherit a child from whom you are estranged, discuss your decision with your family. Tell your children that you have decided that a charitable organization would best benefit from your assets. By sharing your decisions with your family, you eliminate the element of surprise and unanswered questions. If you communicate your reasoning for a particular decision, your children are not left wondering why. It is often surprise and the inability to ask why which leave the unanswered questions and emotional turmoil which result in litigation.

2) Retain the services of a well-qualified estate planning attorney to assist in the preparation of your documents. An attorney that specializes in estate planning will be able to draft documents that clearly articulate your wishes and prevent confusion over what you wished for your assets. An experienced estate planning attorney will be able to discuss your options such as including a no-contest clause to deter litigation. 3) Keep your documents updated. If you have named specific beneficiaries, such as grandchildren, and a new grandchild is born, update your estate plan as soon as possible. By ensuring that your documents are up-to-date, you can prevent unintended slights. 4) Consider how you want to gift your personal belongings. If you have personal items that have sentimental value to particular members of your family, consider gifting these items specifically in your trust or giving the items during your lifetime. A common trust provision is that your personal effects are to be split equally amongst your beneficiaries. However, this is easier said than done. How does one divide up china, silver flatware and a grand piano among two beneficiaries? If over the years you have promised specific items to certain family members, spell out your wishes or give the item during your lifetime. This can help prevent future misunderstandings, arguments and hard feelings between your beneficiaries.

5) Think carefully as to who you would like to serve as trustee of your trust after your passing. If you know that your children are likely to argue over “who’s in charge,” you should consider selecting someone other than one of your children to serve as trustee. Perhaps a family friend or a neutral private fiduciary would be a better selection so as to minimize conflicts amongst your children. You should select at least two individuals to serve as trustee in the event that your first selection is unable or unwilling to serve. You should also discuss a trustee’s responsibilities with the people that you have selected so that they understand the responsibilities that they will be accepting.

In a coming issue, we will discuss what to do if litigation arises over the trust.

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