Case Study – Trustee Dispute

We acted for the daughter (‘C’) of the Deceased, who was named as a Trustee under the Deceased’s Discretionary Trust. C was also a discretionary beneficiary under the Trust, however, we were instructed in her capacity as Trustee.

C was a Co-Trustee of the Trust with her half-sibling (‘S’). The Deceased had left a letter of wishes to accompany the Trust and C wished to follow the provisions of the Letter of Wishes, however, S did not as the Letter of Wishes did not favour her.

A dispute arose between the parties and various allegations of theft, fraud and forgery were raised. In addition to this, the wife of the Deceased, brought a claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 (“Inheritance Act”).

Challenges

The challenges to be addressed included:

• Ensuring that C continued to act neutral in her role as Trustee;

• Being able to obtain evidence of all the Discretionary Beneficiaries financial circumstances to compare this to the Deceased’s letter of wishes to enable C to act in the best interests of each beneficiary;

• Negotiating a settlement between the Trustees whilst also having to consider an intimated claim from the Deceased’s wife under the Inheritance Act.

Solutions

• Providing the legal basis for our client’s position - We obtained the relevant documentation and evidence required in order to establish the financial circumstances of each discretionary beneficiary. The Trust specifically named C, S, D’s spouse and any descendant of C & S as beneficiaries. S did not have any descendants, however, C had one. It was advised that C must remain neutral in her capacity as Trustee and, due to D’s spouse already receiving a property outright, it would align in her best interests to not receive a substantial sum from the Trust (and the fact that she was in a strong financial position), although it would not be in her best interests to receive nothing, especially considering she was his spouse.It was also advised that it would be appropriate for C’s daughter to receive something from the Trust. She is named as a beneficiary and there is no reason why she should receive nothing. It should not impact the decision of the Trustees that one of them had a descendant and the other did not. Taking into consideration the financial circumstances of all beneficiaries, we advised C accordingly on what distribution would be in the best interests of each beneficiary.

• Negotiating a settlement - It was known by all parties that D owned a significantly valuable property. When reviewing D’s Will, Trust and Letter of Wishes, it was established that he wished for his property to be left to his two daughters in unequal shares, favouring C. Within D’s Letter of Wishes, it clearly stated that he did not wish to leave his spouse anything from his estate, as a result of already transferring a property into her sole name during his lifetime.We advised C that a Letter of Wishes is not a legally binding document, however, given the nature of a discretionary trust, it is of course at the Trustees discretion how the Trust is distributed. It was advised to C that attempting to negotiate a settlement would be a much more cost effective option for her as opposed to potentially have to defend Court proceedings.

• Managing the client’s emotions and expectations of the case - A claim regarding your deceased parent is always going to be emotional for the client, especially when they had such a close relationship. We offered guidance and support throughout the process in order for it to be as smooth of a process as possible, given the circumstances. It was also stressed to A that these types of claims, once litigated in Court, can be extremely costly and in a lot of circumstances, any award that is given could likely be eaten up in legal costs. It was advised that a settlement be sought after, in the best interests of all parties involved and to bring the matter to a conclusion, so to avoid any further stress of litigation and to be able to properly grieve the loss of a parent.

Impact

After putting our case forward on the circumstances of each discretionary beneficiary listed under the Trust, an agreement was finally reached, departing slightly from the terms of the Letters of Wishes, however, still in favour of C. A small sum was also agreed to be made to both D’s spouse and C’s daughter.

Reaching such an agreement has had a huge impact on C’s life, as she is now able to properly grieve the loss of D, and can also enjoy the benefit of the assets that were always promised to her and D wished for her to have. Additionally, C now does not have the stress of continuing litigation and potentially defending any claim to Court.

Jack Bristowe, a Solicitor in the Wills, Trusts and Probate Disputes team, was committed to providing legal assistance to C and achieving a positive outcome in the circumstances. The goal was to achieve what was clearly D’s last wishes, continuing to analyse and compare D’s letter of wishes alongside the current circumstances of all Discretionary Beneficiaries. A suitable and cost effective outcome was achieved and all parties are now able to walk away from the matter without incurring further substantial legal costs.