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Mediating Trust Disputes

April 19th, 2011

Having mediated a number of trust disputes, I have noticed several challenges specific to mediating trust cases. One is that the involved parties can be quite varied, including the beneficiaries (who ironically may have no legal standing to make decisions), the trustees (who may have no personal stake in the real dispute), the settlor (who may or may not have any standing, but has a large moral investment in the issues), a protector (if any), and perhaps others. Beneficiaries themselves may often have conflicting interests in regard to the trust property. More parties generally means agreement is harder to achieve.

The architecture of parties can easily complicate the decision-making process, which requires extra work on the front end clarifying who the “parties” are and the nature of their respective roles to avoid future roadblocks.

In one case, a trust company was the trustee and was the technical “party” to the litigation. On a practical level, however, the beneficiaries were the ones truly impacted, but were not litigation “parties”. Unfortunately, the trustee could not simply do what the beneficiaries wanted since the trust contemplated potential (as yet unborn) beneficiaries. That class of potential beneficiaries also had to be protected by the trustee, even if it meant going against the very living beneficiaries who were the primary focus of the trust. As a result, a mini-negotiation between the beneficiaries and trustee became necessary.

A second challenge is lack of flexibility. Various (often sensible) options may be precluded by the terms of the trust. For example, in the case of the Barnes art collection, the Barnes trust document precluded any sale or loan of the art in the trust, even if it was to earn money to protect the remaining assets. Many trusts do allow for flexibility in the trust to be created by certain acts (e.g., replacement of trustees, amendment of terms), which may create flexibility in option generation, but the extra step involved is a significant hurdle in getting parties to consider viable options. When parties take positions because the trust document limits their flexibility, remember that the trust itself may be negotiable.

Written by Paul Godin, LL.B., C.Med

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