I often receive calls from people who want to know: “What is the best thing to do to get my affairs in order?” They are usually in their 60’s, have been to a few funerals, and have experienced, directly or vicariously, the bloody battles over wills, money and property that come after someone’s death.
Recently, I finished working on a case where, for three long years I was involved in litigation for and against family members of immigrant parents. The battles began in 2002, after dad died leaving everything to mom in a trust. In 2009, Mom developed early signs of dementia. One of her three daughters began helping her with her financial affairs. A year later, Mom moved in with a different daughter, living out of state, who took over where the other daughter left off. In both cases, the check records were not as neat and clear as they should have been. Finally, in 2011, Mom died and one of the daughters was appointed trustee. It was here that things got very ugly.
The parents had left their four adult children a very nice property consisting of a main house and two rental properties as well as several hundred thousand dollars in cash that was to be divided equally among a son and three daughters. All of the assets were held in a trust and the lawyer who had prepared the trust had created a graphic drawing to ensure that everyone understood it.
Despite the clarity of the trust, the brother felt that, as the only son, he was entitled to the entire inheritance. So, while living in the main house and overseeing the two rental units, he was depositing the rental income into his own personal account rather than into the trust. His argument was that his sisters had deprived the trust of the mother’s money by paying their expenses while she was alive. As a result, despite the trust being clear, the family antagonism spawned two lawsuits, within and outside of the trust, countless motions, settlement conferences, and four changes of lawyers by the unhappy brother resulting in $150,000 to $200,000 in extra legal fees and costs to the trust.
As a litigator, my workspace of choice is in the courtroom. When people fight over money and property, I know exactly what to do: in probate or in regular civil court. When a trust gets drafted by an estate and trust lawyer, he or she writes down the wishes of the person making the trust. Unfortunately, there was a conflict between the parents’ plans for distributing their property to their four children and the son’s wishes.
Finally, a trial date was set and everyone geared up for battle. But before that could happen, the Court recognized this train wreck of a case as too toxic for trial and the parties were ordered to go to a settlement conference before a tough settlement judge. After the judge’s warning of the perils of going to trial, and after bruising sessions, the parties hammered out a settlement. But just as everyone was ready to go home, new skirmishes began.
Similar to the in-fighting that took place over the trust, the settlement agreement generated new court skirmishes until the property was finally appraised and sold. Still to come was the battle over selecting the appraiser: His fee contract took six months as well as trips to see the judge. In the end, after the property sold, payment of most of the trust proceeds was made leaving a squabble over whether the brother got more money than the sisters.
Why is any of this interesting or important to know when creating a trust? The answer is simple. The drafting lawyer must KNOW THE FAMILY. This means your lawyer must know which sibling or beneficiary is most hated by the others, who will fight if they don’t get their way, and which family member is best suited to manage family politics.
My suggestion is as follows: Make the family member who can get along the best with the others the trustee. Then give that trustee broad powers, especially to hire a good lawyer to protect the trust should fighting ensue — once the parents both die.
The best drafted trust will become a target range or a nuclear bomb test site if the dynamics of the family are not clear, or worse, are ignored by the lawyer. The only way you will get to a good and workable trust is if you have the will to understand and deal with the family of beneficiaries early on, before the fighting starts!