Wasted asset - contentious trust lawyers and family wealth
I was talking to a good friend of mine recently and we commented that, in the context of the launch of an international trust disputes book, 25 years ago the species of ‘contentious trusts and estates lawyer’ did not exist. Of course there were disputes, but the usual private client lawyer would deal with them, and if they actually got anywhere near litigation, someone in the firm’s litigation department would step in and do the necessary. It is very interesting to consider why this explosion into a separate discipline has occurred.
First, I think there is an issue about the fact that so many trusts are drafted in the form of discretionary trusts as opposed to fixed interest trusts. There is a tension for a professional person, trained to be an advisor, to be placed in the position of having to make decisions as a trustee. Added to that, settlors sometimes appear to give different signals to different discretionary beneficiaries who have found that reality did not match expectations. Was this driven by mistake or ignorance? Or was it cynical?
Further, in the 1970s and 1980s, some pretty aggressive advice was given about what offshore structures could do. For example, it was thought that forced heirship or creditors could be avoided through asset protection trusts, simply because local legislation had been passed. Attacks on them came as a surprise at the time, but they were a tribute to the imagination and learning of lawyers who looked critically at what had been put in place. Finally, there is the fact that now we have moved into a more litigious world and individual family members fight for what they consider to be their ‘rights’.
‘There must be settlors turning in their graves watching the assets they had built up being spent on lawyers’ fees’
However, there must be settlors turning in their graves watching the assets they had built up through luck or good judgment being spent on lawyers’ fees. There is talk these days of mediation but it comes on the horizon when the damage has been done. Litigation seems to acquire a life of its own and positions become entrenched. Family relationships are damaged, often irreparably, granted that some of those relationships were probably precarious already.
The wealth of families deserves better than to be inherited by lawyers! It reminds us that things can go wrong at all stages of the process – from taking superficial instructions from clients without a deep understanding of family tensions, from giving impressions of what can be achieved that are unrealistic, or even wrong, from trying to be too sympathetic or too unsympathetic to beneficiaries or settlors. Equally, if you are running a contentious department, you need contentious cases. But often you wonder if the claimant has a clear goal in mind.
Let us all remember that, when the creator of the money walked through the door for advice, the concept of litigation over their wealth was the last thing they contemplated.
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