The Crusader: Siblings in war over inheritance exposes trustee pitfall | The Crusader | Finance

Safeguarding a family’s inheritance did the oposite when it turned into a toxic legacy with the siblings turning on each other over the spoils.

A trust was at the heart of the division Pauline Phillips was experiencing, she told Crusader a few weeks ago.

Within this arrangement is the deed, the crucial document which sets out the terms of the trust, who benefits and which assets are held within it.

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Pauline’s parents had set their one up some years ago on the advice of their solicitor as they thought it would protect the family home and avoid conflict between Pauline and her two brothers.

But instead confusion, about who should take the lead and manage the trust after both parents died, has plunged the trio into a bitter, long-running and high cost feud. Because of that lack of clarity at the start, “I’m on the brink of bankruptcy and facing another court hearing. I’m 76, disabled and don’t know where to turn next,” Pauline explained.

According to Roman Kubiak, partner and will, inheritance and trust disputes specialist at law firm Hugh James, the turmoil engulfing her is a classic example of good intentions and a well-meant trust deed lacking forethought about the realities of what would happen when the parents died and the children were left to manage the family assets.

“A trust isn’t just a wrapper for assets,” he explains. “It’s a living legal relationship. If the deed is vague about decision-making or appoints family members to manage the assets, disputes can arise when emotions are running high after a death.”

Trusts can continue for many years, with many modern ones designed to hold assets for 125 years so key considerations before a deal is sealed include the identity of the trustees. “While it can be tempting to name family members in favour of professionals to save costs, all too often this can lead to disputes such as in Pauline’s case, with the siblings each seeking to remove the other,” points out Kubiak.

It’s also important to manage expectations. He advises families to try to discuss their plans when setting up trusts in advance. People placing assets on trust should think about setting out their wishes in an accompanying “letter of wishes”. Though not binding on trustees, these can prove helpful in informing the trustees about how to deal with any assets.

Don’t forget the advantage of dispute resolution. Deeds can build in arbitration or mediation before anyone heads to court. Also very important are powers to vary. “Trust deeds can incorporate powers to trustees to update and vary the terms by agreement which can head off potential problems,” adds Kubiak.

So is a trust the right vehicle anyway? “For a number of years people have put their homes into trust either to avoid care home fees or because they’ve been told it’s a sure-fire way to protect their family wealth,” observes Kubiak.

“While, when used properly and with the right advice, trusts are an effective tool for managing inter-generational wealth, they are also sometimes promoted as “quick fix” tools to vulnerable people whose families are left to deal with the mess of trying to unpick them after death.”

For some families, simpler routes can work better, for instance by passing the family home to children under a will and providing for a right to reside to a surviving spouse, known as a “life interest”.

Pauline has felt so let down, she wondered whether even at this stage she could sue the solicitor who drew up the deed.

“Possibly,” says Kubiak, “but success hinges on proving that the solicitor owed her a duty of care, that their advice was defective, and that any failing caused a financial loss.

“Claims for professional negligence can generally only be brought within six years from the negligent act, or three years from when a person first learns of the potential negligence, or ought to have known of it, subject to a longstop of 15 years.”

Given the complexity costs, and strict court deadlines, Pauline should seek specialist legal advice swiftly. While a court can appoint an independent trustee or order the sale of the property under the Trusts of Land and Appointment of Trustees Act 1996, this can be slow and expensive.

As such, Roman advises that Pauline and her siblings may wish to consider mediation as an alternative form of dispute resolution. While not suitable for every case, mediation has been proven to be an effective tool to resolve family disputes in a high proportion of cases while saving the financial and emotional costs of going to trial. [Names have been changed] https://www.hughjames.com/services/contested-wills-trusts-estates/trust-dispute-solicitors/