Stephen Trefts, President
Disputes are a fact of life and are often the reason that families establish trusts with us. Our role as trustee is to resolve the disputes fairly and administer the trust impartially.
A primary reason for family conflict is that the wrong person is appointed as manager of the family wealth. Conflict frequently occurs when a parent appoints a new spouse as a trustee for his or her trust. The natural resentment from a divorce is magnified when a stepchild suspects that the stepparent is squandering his or her potential inheritance.
Another potentially explosive situation is for parents to appoint a responsible child as trustee of a trust for a sibling who is financially irresponsible, is mentally or physically incapacitated or has a chemical or alcohol dependency. Inevitably, the death of the parents precipitates war between the siblings.
Unfortunately, we are often not brought into the picture until after the parties have spent thousands of dollars on attorney fees and are emotionally exhausted. After reviewing the documents and interviewing all the parties and their advisors as well as inspecting all real estate, we offer a solution to the conflict and let them know how we will manage the trust. Usually, the families are relieved when common sense, absent emotion, prevails.
Several years ago, we had a situation where a mother appointed a reclusive son as a trustee for her family, some of whom were individuals with drug dependencies and criminal records. Her estate consisted of valuable jewelry and heirlooms, securities and undeveloped real estate. Prior to our appointment as trustee, the family had been fighting for nearly 10 years and had spent large amounts on attorney fees. When we were called in by the attorneys to be the successor trustee, we were able to distribute the personal property equitably, develop the real property, and convey the proceeds to the family.
Unfortunately, conflict sometimes occurs after we are appointed as the trustee because a party may disagree with our discretionary decisions. While Washington State law allows for a nonjudicial resolution of dispute, in every trust we include dispute resolution language that outlines a resolution strategy. The parties agree to attempt to “settle all disagreements between themselves in good faith.” If that fails, the document calls for submission to nonbinding mediation. As a last resort, the document mandates binding arbitration.
In the mediation process, all parties are brought together and encouraged by a skilled mediator to arrive at a settlement. The agreement is purely voluntary, and the results are usually preferable to a court decision. When the parties craft their own solution to a problem, there is usually a satisfactory buy-in to the result.
Print Date: Fall 2007