DISPUTES AMONG THE PARTIES TO A TRUST

What happens when there are trust disputes?

The human factor is responsible for most trust disputes because trusts involve different people with conflicting interests. Differences of opinion or need are sure to surface at some stage:

• Among the trustees.
• Among the beneficiaries.
• Between the trustees and beneficiaries.

Better to solve disputes internally than drag them off to the courts at great expense to privacy and the trust – unless the disputes are founded on a breach of law and duty.

Reasons for disputes include:

• A breach of fiduciary duty (trustees).
• Disagreements between beneficiaries with opposing interests.
• If the terms of the trust deed are ambiguous and lead to administrative problems.

Breaches of fiduciary duty and trust are the most serious. This refers to material losses incurred by the mismanagement of trust assets by a trustee/s. If they fail to manage trust assets with “care, diligence and skill”, there may be serious legal consequences that involve claims for damages suffered by the beneficiaries. Aggrieved parties are advised to consult an attorney to determine their rights and avenues of recourse, as the burden of proof rests with them.

Breaches of fiduciary duty and trust that place the trustee/s at fault for losses include:

• Where a trustee puts his or her own interests ahead of the beneficiaries’ interests, usually by treating trust property as his or her own and personally benefitting from it.
• If any trustee/s profits through improper dealings with trust property. This may result in the court ruling in favour of piercing the trust’s veneer to expose its true purpose.
• Any misappropriation of trust assets, including assets invested in a manner not authorised in the trust deed.
• Any negligent or careless administration that causes the beneficiaries to suffer damage.
• Instances where the trustees either acted, or failed to act, in circumstances that required rightful action.
• Any trustee actions or omissions deemed wrongful.
  It is worth noting that any third party who assists a trustee in breach may be jointly and severally liable for loss.

No beneficiary is likely to accept material loss without a fight. The onus is on the trustees to handle disputes with integrity and wisdom and give due regard to the office of trusteeship – or face the consequences!