One of the reasons people create living trusts is to reduce the likelihood of disputes among family members. Most estates do get settled without disputes, and those with disputes are often easily resolved because the trust, will, and beneficiary designations are clear. Unfortunately, sometimes family members are determined to be fractious, and in that case no amount of careful planning can completely remove the risk of a costly dispute. There are steps that can be taken to help resolve trust disputes, as exhibited through the case example below.
One example of an estate plan that was not guarded from potential disputes was that of Lorraine. She had a revocable living trust, prepared by a lawyer in 2003. It contained straightforward provisions: most of Lorraine’s property was to be divided in half, with one half to go to her son Greg and the other half to her son Tony’s two children. Tony was named as successor trustee. Like many revocable trusts, the document included a “Schedule A” listing the assets that Lorraine was transferring to the trust’s name.
The first problems arose when Lorraine started writing on the trust document directly. In 2004, 2006 and twice in 2008 she wrote on Schedule A, indicating what should happen to some items of her property. Also in 2008, she had Tony’s wife write out an amendment to the trust. Lorraine died shortly thereafter, without having her trust looked at or formally updated by her lawyer.
After her death, one of her sons, Greg, removed some items from her house but did not account for them. Then he filed a civil lawsuit against his niece and nephew, asking the court to divide a piece of Lorraine’s property amongst the three of them. He also filed a complaint against his brother, Tony, alleging that Tony had breached his duties as trustee by not distributing the property in kind, had made allegations of theft against him, and had favored his own children over Greg in his handling of the trust.
At the very end of the trial, Greg and his niece and nephew struck a deal on the property. The judge found that Tony had not breached his fiduciary duty, but that Greg had initiated most of the problems by his own actions. She also ruled that Greg had to pay a total of $176,466 to the other parties for attorneys’ fees, and another $4,979.19 in costs.
Greg appealed, making several more allegations against Tony, including that Tony had mismanaged the trust. The Court of Appeals affirmed the original decision and awarded Tony and his children their requested fees and costs for having to respond to the appeal itself. In re Bower Revocable Trust, May 14, 2013.
The dispute was both expensive and time-consuming. In addition to approximately $200,000 in fees and costs, Greg was ordered to pay for Tony’s and his children’s lawyers in addition to his own legal fees for his own side of the litigation. The Court of Appeals decision was rendered more than four years after Lorraine’s death (and that was speedier than most similar cases in our experience).
- Tips to Avoid Costly Delays
- Don’t modify your estate planning documents by writing on them directly.
- Include some language directing your children how to resolve disputes.
- Consider complete disclosure and transparency, and do not hesitate to affirmatively seek court direction.
To avoid future family disputes and expensive, time consuming litigation, here are a few tips to consider:
The Astill Law Office has provided high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, contact The Astill Law Office at 801-438-8698.