I recently had the opportunity to review a trust from one of the top trust attorneys from Asheville, North Carolina and was a little disturbed with what I found. I went through the usual 222 point review looking for each of the provisions our trusts have, and in the end the trust had 75% of them, which is actually very good for what we usually find. However, what was really disturbing was what was missing. Considering the level of expertise it took to create these trusts, it seemed strange that the missing items were pretty universal:
- A clause stating that any beneficiary contesting the trust is cut out in order to discourage frivolous litigation
- A clause mandating that arbitration be used to settle all disputes; and
- A clause giving the trustee the right to choose the financial, legal, and tax professionals they are comfortable working with.
In a closer review, I saw exactly why the hairs on the back of my neck were up. The attorney drafting the trust named the primary attorney of his law firm to be the “Trust Protector” giving them the power to remove the trustee for any reason or no reason whatsoever, the power to appoint themselves as the trustee, and to then charge the trust as the attorney, as the trust protector, and also as the trustee. As the trust protector, they could hire themselves or the firm for as many hours of legal work they thought prudent no matter what work is actually needed. And when you take a look at the clauses mandating arbitration and cutting out beneficiaries who contest the trust, it seems clear that the intention is to leave open the possibility of resolving multiple disputes through the court system and therefore incurring larger legal fees.
Was this deliberate? No one can know what was in the mind of the drafting attorney, but the fact that most other aspects of the trust were spot on good just makes the omission of these fairly standard provisions all the more suspicious. And so while the attorneys may appear to be looking out for the client’s best interests, it’s sometimes prudent to peel back the tape to see what leaks the attorney may be deliberately causing.