HIGHVERN recently hosted an industry round table discussion over lunch in Guernsey. Kerrie Le Tissier and Richard Joynt from HIGHVERN were joined by Catherine Grum (Catherine Grum Consultancy), Monika Byrska (Howard Kennedy), Ben Havard and Cerisse Fisher (Collas Crill), Alasdair Wilson (Harbottle & Lewis), Paul Hardwick (Macfarlanes) and Sarah Farrow (EY). La Fregate Hotel in Guernsey provided a perfect setting for a wide-ranging discussion on contentious issues that high net worth families are currently facing.
Commercial vs family disputes
The group had a discussion regarding ways in which litigation relating to trust structures can be foreseen and minimised. This can be where the trust structure is under attack from an external source (such as creditors or beneficiaries).
It was noted that disputes vary significantly depending on whether they are commercial or familial. In commercial disputes, parties can often move on quickly once resolved. However, family disputes tend to become personal, making it essential to repair relationships to achieve the best outcome where the family can continue working together. It is often the case that different beneficiaries will have different levels of knowledge or information when entering into a dispute, either with the Trustee or with each other.
Understanding the whole picture
Advisers should be alive to the possibility of some parties being well-advised (even if this is not disclosed) and look at the impact this may have on the dispute and the resulting relationships. It is usually better if it is clear who is being advised and by which party. Understanding the full situation, including the roles of power holders, trust assets, and beneficiaries, is critical in avoiding misunderstandings that can lead to legal action.
Setting expectation and communication
Setting expectations is also key in minimising the risk of future attack from beneficiaries. Disputes often arise where beneficiaries of discretionary trusts consider that they are entitled to the trust assets and regard it as akin to a bank account. Trustees need to ensure that beneficiaries understand the nature of the trust and their interests as a beneficiary.
Trustees should aim to communicate regularly with beneficiaries – even those who prove to be difficult to find or resistant to receiving communication! ! There is a temptation to “not to disclose too much” as there is a feeling that it may encourage litigation, but in reality it is usually a dearth of information that causes beneficiaries to become suspicious that their interests are not being looked after sufficiently.
Family charters and succession planning
The benefits of family charters were also discussed. The group agreed that these are most effective when they are done with the full participation of all key family members rather than just the matriarch or patriarch, and that if they are continually reviewed and revised depending on updated family circumstances. However, it was generally agreed that any succession planning that envisages that major changes will be put in place as a result of the matriarch or patriarch’s death risk being challenged. The most effective succession plans solidify practices which are already in existence, rather than ones which dictate massive change from beyond the grave.
Seeking advice
As always, Trustees should consider taking their own professional advice in appropriate circumstances, particularly when making momentous or potentially controversial decisions, or when preparing documentation that may have significant legal consequences.
