There has been a marked recent increase in interest from law firms and clients seeking third party litigation funding for high value contentious trusts disputes.
Recent figures from the English High Court demonstrate a significant rise in the number of inheritance disputes between 2012 and 2016, and with a 36 per cent increase for such disputes being reported for the year 2016 alone, this trend looks set to continue.
Those seeking to make a claim following the death of a family member or partner may find that the assets have been put into a trust some years earlier.
The claimant’s attention must then focus on whether the assets can be clawed back or otherwise claimed from the trust.
More often than not, high value trust or inheritance disputes involve complex trust structures with a significant offshore, multi-jurisdictional element.
Such disputes are very costly to pursue and the relative financial resources available to the parties can create a “David and Goliath” style contest, making them obvious candidates for litigation funding.
The offshore trusts that contain the largest sums are typically set up by those who – having generated their wealth – understandably wish to retain significant control over its disposition, even once it is housed in a trust for asset protection or other purposes.
As Jonathan Hilliard QC, of Wilberforce Chambers, puts it: “This approach is unsurprising for an entrepreneur who is used to keeping a close eye on the funds that he or she has generated and may wish the offshore trust to be set up to address privacy concerns. Accordingly, many offshore jurisdictions contain express provisions allowing those setting up trusts to retain significant control without invalidating the trust.”
A close relationship between the person setting up the trust (the “settlor”) and trustee, and any other officers of a trust (such as the “protector”, whom the settlor sometimes appoints to watch over the trustees) will ideally continue throughout the duration of the settlor’s life.
However, upon the settlor’s death, experience sadly tells us that this close relationship will not always survive for long.
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Those who were expecting to inherit from the settlor may dislike what they see as their inheritance being locked up in a trust, and any third parties with claims against the deceased may be disappointed to find that he had no assets in his personal name.
Add to this the possibility that the settlor may, on his or her death, have chosen to ask the trustees to pass some of the trust assets to a person (such as a second wife) that the next generation do not like, and you have a combustible mix that has the capacity to spill over into litigation involving significant sums across multiple jurisdictions in which different assets and elements of the trust structure are situated.
Questions appear on the last page of this article.