A newly published study examining hundreds of contested trust cases provides rare insight into the specific estate planning decisions that frequently lead to intra-family litigation. The research, appearing in the Washington University Law Review, highlights that unequal distribution of control and benefits among heirs is a primary catalyst for legal conflict.
The analysis focused on 640 trust disputes identified through thousands of civil filings scheduled before the San Francisco Superior Court between 2014 and 2020. Researchers Christopher Ryan of Indiana University Maurer School of Law, Reid Weisbord of Rutgers Law School, and David Horton of UC Davis School of Law found that one of the most significant pitfalls in wealth transfer is appointing a single child to control a family trust when other siblings or relatives are also beneficiaries.
“That arrangement could combine ordinary sibling rivalry with a genuine power imbalance,” Ryan explained in an email to CNBC. He noted that granting one child discretionary power over trust distributions can exacerbate existing feelings among siblings that a parent showed favoritism.
The study revealed that nearly a quarter of the disputes involved a descendant beneficiary suing another descendant who also served as the trustee. Many of these petitioners were siblings, though some cases involved grandchildren. Almost all the petitions concerned revocable trusts, which are commonly used to allow a successor trustee to manage assets after the settlor’s death.
While trusts are often utilized to bypass the time and expense associated with probate, they can instead draw families into expensive disputes that last for months or years. The average case, including those that were eventually settled, lasted 481 days.
Furthermore, the researchers found that in 74% of the cases, the trustee was accused of misconduct, specifically breaches of the duties of care or loyalty. In nearly a third of the petitions, beneficiaries demanded a detailed accounting of the trust’s finances, a request Horton suggested reflects a lack of transparency and trust within the family structure.
Sounds like poor planning rather than legal issues. Parents need to communicate clearly.
Why wasn’t an independent third party trustee chosen in these cases to avoid conflict?
481 days on average?! That’s four extra months of pure stress and legal bills.
Is it really surprising that power struggles destroy families? Transparency is key.
My dad made my sister the sole trustee and left me out. Talk about a recipe for disaster.