This Special Report examines the causes of trust disputes and explores the steps that settlors, trustees, beneficiaries and others can take during each stage of a trust’s lifecycle – design, execution, administration and termination – to reduce the risk of sparking a dispute.

Trust disputes can be tremendously costly, in terms of legal fees, hiring experts and lost opportunity costs, as well as the costs attendant with the often emotionally charged atmosphere that can pit family members against one another. Despite the high toll, trust litigation continues to increase around the world – both in the number of matters being initiated and the amounts in controversy – as trust instruments become increasingly important vehicles in the management and transfer of wealth of various sizes.Preventing a fire is substantially less costly than fighting one. Identifying and appreciating the potential causes of trust disputes puts settlors, trust officials and beneficiaries in the best position to prevent a dispute from developing or accelerating.This Special Report examines the causes of trust disputes and explores the steps that settlors, trustees, beneficiaries and others can take during each stage of a trust’s lifecycle – design, execution, administration and termination – to reduce the risk of sparking a dispute. Supported by real world experience and input from leading international trust practitioners, including estate planners, general counsel and experienced trust litigators, this Special Report delves into key concepts such as:thoughtful design of a trust’s governance;incorporating flexibility and adaptability into a trust structure;the need for constructive communication and engagement between fiduciaries and beneficiaries;practices and procedures trust officials should consider implementing in trust administration; andhow trustees and beneficiaries can avoid adding fuel to the fire once a dispute arises.The authors also examine the benefits of involving different perspectives, including those of experienced trust litigators, at various stages of the trust’s lifecycle, and offer practitioner insight into the measures and approaches both fiduciaries and beneficiaries should consider taking when a dispute first presents itself.Filled with real-world practitioner guidance, perspective and insight on issues of critical importance to fiduciaries, trust officials and beneficiaries alike, this Special Report is essential reading.

Acknowledgements 7I. Introduction 91. Trends in trust disputes 101.1 Deep fakes and the metaverse 101.2 Family office conflicts 101.3 Compliance-driven conflict, litigation and court activity 112. Common causes of trust disputes 122.1 Poor drafting 122.2 Communication failures 142.3 Lack of education 152.4 Disenfranchisement 162.5 Appointment of the wrong trust officials 162.6 Diminished capacity (including undue influence) 192.7 Challenges of recollection 223. Our approach 22II. Trust dispute avoidance through design 231. Managing the settlor’s expectations 232. Good drafting 243. Creating the appropriate governance structure 273.1 Checks and balances 273.2 Selecting the right person for each role 303.3 Beneficiary committees 363.4 Qualifications 363.5 Fiduciary versus non-fiduciary capacity 393.6 Term limits 393.7 Age limits 403.8 Designing the right process for succession (appointment and removal) 413.9 Compensation 413.10 Sharing information 443.11 Avoiding co-trustee dysfunction 444. Communicating with the beneficiaries (or not): the duty to inform and the use of quiet trusts 475. Incorporating flexibility and adaptability into the trust 505.1 Power to add and remove beneficiaries 515.2 Variation or modification 535.3 Decanting 535.4 Changing situs 545.5 Changing governing law 545.6 Termination 556. Selecting appropriate liability and evidentiary standards 557. Using no-contest or forfeiture provisions to discourage disputes 568. Incorporating processes for non-judicial dispute resolution 579. Getting the litigator’s perspective during the drafting process 5910. ‘Failure mode and effects analysis’: early detection of potential issues and warning signs 66III. Minimising trust disputes through thoughtful execution 691. Family dynamics redux 692. Witnesses 703. Presence of individuals other than the settlor and witnesses 724. Self-imposed formalities 725. Lifetime approval of trusts 73IV. Administration: deploying best practice and procedures 751. Follow the terms of the trust 762. Engage proactively 763. Communicate with the beneficiaries 773.1 Ongoing due diligence 773.2 Proactive trust accounting 794. Maintain good records 804.1 Retention practices and policies – the ‘hit by a bus’ scenario 804.2 Trustees and other trust officials 804.3 Distributions 814.4 Investments 824.5 Conflict transactions 834.6 Compensation 834.7 Taxes 845. Evaluate the trust and administration regularly 845.1 What has changed? 855.2 Would a change of situs be better for the trust? 865.3 Is modification (variation) or decanting warranted? 875.4 Should the trust be divided into separate trusts? 875.5 Are the right people (still) in the right roles? 895.6 Is your reliance on outside guidance (still) reasonable? 895.7 Are the trust officials working together effectively? 916. Evaluate the trust and administration when an issue arises (or maybe not) 927. Utilise experienced litigators outside of litigation 927.1 The devil’s advocate: having a litigator review proposed changes 95V. Reducing the risk of disputes at termination 971. Releases, judicial accountings and indemnification 982. Providing information 1023. Termination fees 1044. Transferring assets 104VI. Managing trust disputes 1071. Avoid exacerbating the problem 1072. Maintain open lines of communication 1103. Taking a thoughtful position 1114. Preserving lawyer–client privilege 1155. Litigation management 1166. Advice for beneficiaries when a dispute arises 118VII. Conclusion 121Notes 122About the authors 129About Globe Law and Business 131