How Do We Resolve Family Legal Dispute Over Property?
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Question:
My family has a trust that only holds property in Montana and $1,500 in cash left. The trustee has wasted money over the last four years. One beneficiary wanted to buy the farm and another outside person wanted to buy the property for $400,000 more, so the one beneficiary filed a lawsuit suing the trust for breach of contract two years ago and nothing has been done in the courts since it was filed. Two of the siblings were given distributions three years ago before the lawsuit was filed.
What are the legal obligations for a beneficiary to have to send in money to help pay the trust bills, which will continue to have ongoing bills for lawyers, property taxes and so on, as this lawsuit continues in the Montana courts. How can the trustee continue without money? Will she have to settle and just let the one sibling buy the property so he will drop the lawsuit?
Response:
It sounds like two of the siblings were paid and are no longer involved and at least two other siblings are arguing about what should happen with the property. The two siblings who received distributions may or may not have signed agreements saying they would return the money, or some portion, if needed. Though such agreements are not unusual, I’ve never seen them enforced. So they are probably out of it.
Given the state of the courts in our country, any resolution in court could take many more years. If the property taxes are not paid during the process, the property could be lost to foreclosure. Under the circumstances, the only people who will gain from the dispute will be the lawyers. The best bet, if the siblings are willing, is to enter into mediation to try to resolve things. If the two siblings who already received their distributions signed an agreement to help cover future costs, if necessary, they should participate in the mediation.
While it sounds like the beneficiary who wants the property for $400,000 less than it’s fair value is a bad actor, it may well be necessary to give him some of what he wants in order to end things. If he won’t participate, then everyone will have to settle in for the long haul and come up with the funds to pay the upkeep on the property and the lawyers. Perhaps one or more of the siblings can lend the necessary funds to the trustee in exchange for a promissory note secured by a mortgage on the property.
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