Overview of Client’s Family Inheritance Issues
Inheriting a family business can be complicated. For example, what if one family member had contributed a significant portion of their time to managing the business? Would it be fair if their sibling, who never had participated in the family business, is provided with an equal share of the business? What if the elderly parent who founded the business is losing competence and making unwise business decisions that ultimately could reduce their children’s inheritances?
In trying to avoid rifts with members of your family, you may try to steer clear of family inheritance disputes; however, when a family member is unwilling to cooperate and starts to threaten your future inheritance, it’s time to act.
Keystone’s client served as co-trustee — alongside her then-96-year-old father — of a family trust that also named her as a primary trust beneficiary. The trust held a Limited Liability Company, which owned a profitable commercial property. It was the trust’s most valuable asset, and Keystone’s client was to inherit a majority share of it upon her father’s passing. But, as the trust’s only living settlor, the father of Keystone’s client wielded substantially more control over the trust, and by extension, the commercial property, than she did.
She was concerned about the possibility that her father was beginning to lose mental capacity. All his life, he had demonstrated a keen business acumen, but now, he was trying to sell the trust’s most valuable asset for substantially less than what it was worth. Not only would such a sale give rise to significant tax liabilities, but it would reduce the amount of each beneficiary’s potential inheritance, as well as the amount of the father’s own trust fund distributions, which he relied on to pay his bills.
Keystone’s client had spent most of her adult life managing the LLC, so she expected to be inheriting the family business once her father died. It should come as no surprise, then, that her father’s decision to sell the LLC’s primary asset for below market value was personal to her.
Since there were only downsides to selling the property, the client felt as though her father might be acting out of spite over their years of disagreements relating to the family business. She wanted the help of Keystone’s inheritance dispute attorneys to ensure that she would get her rightful share of the business she helped run for much of her life, regardless of whether or not her father proceeded with selling the property.
What Is Trust Litigation?
A trust is established to protect and hold the trust creator’s assets on behalf of the beneficiaries of the trust. When the trust creator (called the settlor, grantor or trustor) dies, trust assets are eventually distributed to the settlor’s intended beneficiaries in accordance with the provisions of the trust. Unlike wills, trusts generally bypass the court-supervised probate process and are intended to be private.
Trust litigation can arise in a variety of contexts. Perhaps a client is seeking to contest a trust. Perhaps a client is seeking to fund a trust through the use of a Heggstad petition, which is a type of 850 petition. Perhaps a client is seeking to protect the trust from being financially harmed by a co-trustee (such as in the case being discussed on this page).
Trust misconduct cases can be complicated, and they often require petitions to be filed with the probate court. They can be both costly and time-consuming. To be successful when litigating trust-related claims, it is necessary to retain an experienced trust litigation attorney, who will understands the laws that govern trusts and the probate court.
Keystone’s trust litigation attorneys have a proven track record of favorably handling trust disputes and expertly guiding their clients through every step of the trust administration process.
A Closer Look Into the Client’s Family Inheritance Issues
Keystone’s client had been butting heads with her father over business matters for years, but recently, her father’s behavior had become so turbulent that it was causing her to question whether her father was fit to serve as co-trustee of the family trust. She believed his lack of fitness was due either to a decline in mental competence or a flagrant disregard for his fiduciary duty to act in the best interests of the trust beneficiaries, which, if true, would constitute fiduciary misconduct.
The breaking point for our client came when her father threatened to sell the trust’s commercial income-producing property, remove her as co-trustee, and strip her of her job as the manager of the LLC for no legitimate reason.
In order to preserve the assets of the trust for her future inheritance, as well as for her father’s own trust fund distributions, Keystone’s client was seeking to have her father removed as a co-trustee. Even though the relationship between the client and her father had been deteriorating for years, it was profoundly sad for our client to take legal action against him.
The father wouldn’t concede without a fight, as this was his nature. Nevertheless, Keystone helped broker a settlement agreement between the client and her father in which the client would receive a sizable settlement sum in exchange for stepping down from her role as manager of the LLC and giving up her interest in the trust.
“But then the father changed attorneys and started claiming he didn’t understand the terms of the original settlement and started making other accusations about our client,” says Joshua D. Taylor, a partner at Keystone who supervised the case.
The process was further complicated when our client’s sister got involved, claiming that she should have been a party to the first mediation and insisting that she be included in the case going forward.
The Results
Our client’s case became a long-fought battle that involved multiple breaches of settlement agreements. But ultimately, Keystone’s trust litigation attorneys were able to resolve the case at a second mediation. The settlement that ensued would allow our client to become the sole owner of the LLC after buying out her father’s and sister’s shares of the company.
“With the new settlement, our client ended up receiving a lucrative income-producing asset whose value far exceeded the value of her potential future inheritance,” Taylor explains.
Keystone’s client merely wanted her fractional share of the family business since she had worked so hard managing the business for years, but Keystone helped fulfill her wish of inheriting the business in its entirety. It was a resounding victory, to say the least.
The Takeaway: Family Inheritance Issues Can Be Resolved With Help From a Skilled Trust Attorney
It can be difficult to stand up to a parent when family inheritance issues are involved, especially if the parent defaults to anger and spite. But as our client learned, you can only let someone throw so many stones at you before you pick them all up, put them together, and build a wall to protect yourself.
If there is one takeaway to learn from this family inheritance issues case, it is to take action sooner rather than later. The ideal first step is always to seek out the help of a qualified attorney.
“Don’t be bullied by anyone, even your own family members,” Taylor says. “And always keep fighting for what is right.”
Are you dealing with a trust matter? Our attorneys can help.
If you have an estate or trust matter that you would like resolved in your favor, Keystone’s skilled team of probate attorneys can help. With years of litigation experience and a singular focus on probate, we can help you secure the best possible outcome for your case.
Call us today to request your free consultation.
