Trustees - who'd have them!

Imagine the scenario. Ben wants to put in place a Will with a discretionary trust in favour of his three children Fran, Dan, and Stan. He has no wife or partner, them having predeceased, and so he needs to choose his trustees. Simply job, you may presume. Appoint the children together, or perhaps an aunt or uncle. Ben trusts his children and ‘knows they’ll do the right thing’ and so he appoints Dan and Stan as trustees because they’re the oldest.?

Fast forward a couple of years. Ben has now passed away and his two eldest children have taken control of his estate. They’ve done everything expected of them as executors and trustees. They’ve called in the estate. They’ve paid all the debts and taxes. They’ve distributed the estate to themselves.

Hang on. Fran gets nothing. I’m not sure that’s what Ben wanted.?

Ben did leave a letter of wishes stating his wish for everything to be split equally between his children. The boys just disregarded it. They wanted the money. They felt it was rightfully theirs, and as Trustees they had the power to make it happen.?

I suspect many reading this will say it would never happen, either because they genuinely trust their children to do the right thing or because they’d never let their client prepare such a Will. Unfortunately though, this situation is all too common and something we get approached about all too regularly. Sibling rivalry is not a myth, and when the last surviving parent dies it takes a moment for everyone to self regulate the new family dynamic.?

The scenario gets even more problematic when blended families are brought into the equation. What if Ben had his three children with two or three separate partners. What if the children were vastly apart in age. How likely are step-children or children with a different parent to equally share an estate.?

Now I can hear the cries of “but they are trustees, they have certain duties and obligations”. The problem is, people just don’t understand what that means and, more worryingly, in certain circumstances are happy to disregard them even if they do.?

I appreciate that with the work we do, we only see when it goes wrong. I expect a number of estate administrators may be able to comment on those that work perfectly. However, we see this scenario often enough that it is clearly an issue.?

So what can we do about it??

It starts at the first Will preparation meeting. When taking instructions it’s vital to understand the family dynamic. Who is everyone. How are they related. Has anyone been left out. Make sure you give or receive good quality advice on the options available as well as the risks. People need to be able to make informed choices about who should control their assets after they have died (and if you are a Will writer, take and keep good notes of your conversations).

Second, if the person making the Will has certain ideas about how their estate should pass, consider whether a Trust is necessary and, if it is, consider preparing a detailed letter of wishes setting out the wishes and reasons.

Third, consider appointing neutral or third party Trustees. If they are a professional they will have a higher standard they must apply to the role they do. They are also unlikely to be swayed by arguments of perceived fairness by the beneficiaries.

Finally, never underestimate the power of greed.

Realistically, when staring at an estate worth a life changing amount historical family issues will come up. Claims of a person knowing their parents ‘true wishes’ will come to light. Issues of deemed fairness over one person carrying the weight of caring for their parent will be raised. While these may be factors that the individual takes seriously, they do not necessarily mean they should receive a greater share of the estate.

Is anyone who may financially benefit as altruistic as a Trustee needs to be? I don’t doubt that there are some people out there. But when leaving the decision of who to financially assist, when every penny paid out is one less for the trustee who is also a beneficiary, it’s not hard to imagine the immediate conflict.?

As a result, it’s always good practice to discuss the issue. It’s good for families to talk to each other about their wishes before it’s too late. It’s essential for Will writers to properly advise on the issues that could arise, and to make certain that the person preparing their Will is armed with all the information to enable them to make their decision.?

While no decent lawyer should ever take on a meritless case, such claims appear to regularly be brought by disappointed beneficiaries just because they think they are owed something by the person who has died. If trusted to hold the whole estate for the benefit of themselves and others, what makes you think yours or your client’s family wouldn’t be tempted to inherit a little more than their sibling. It’s not a risk I’d be willing to take.?

What if it does all go wrong?

Seek specialist legal advice early and quickly. There may be something you can do (such as a freezing injunction, recalling the assets into the trust and/or replacing the trustees, for example). Equally, there may not be anything you can do. It will depend entirely on the circumstances. Either way, waiting too long or doing nothing will not change the situation.