Does anyone have suggestions as to how to limit challenges by beneficiaries challenging trust distributions? In Georgia, In Terrorem clauses are usually not enforceable. I still use them but they may not be enforced in litigation.
Chuck KinCannon
The Law Offices of Charles P. KinCannon
I would imagine that it would only be possible to stop beneficiary challenges to distributions from trusts where the jurisdiction has legislated to remove the beneficiaries’ rights to information on a trust, akin to the restrictions contained within Articles 25 and 26 Foundations (Jersey) Law 2009.
To try and incorporate such a term into a trust may well cause the trust to be void, unless specifically permitted by the governing law of the trust.
In general, I believe that an attempt to inhibit a beneficiary’s right to challenge a trustee’s actions would be struck out. Having said that, a trustee does have various rights which it can call upon where a challenge is considered inappropriate, so that beneficiaries do not have “free rein” to question each and every distribution.
Whilst some trustees will enter into discussions with beneficiaries ahead of making any distribution, that generally only works where the beneficiaries are all of a mind (query – is this the trustees exercising their discretion or the beneficiaries carving up the trust between themselves?). If the beneficiaries cannot agree, then in such situations, the trustees have shared their thoughts, etc., and would be unlikely to be able to call upon “Re Londonderry’s Settlement” to draw a veil over the reasoning for the eventual exercise of their discretion – a “double-edged sword”.
Paul Saunders