A Brighter Future through mediation

As trustee, we have a fiduciary duty of loyalty, of prudence, and to act in the best interest of our clients. To that end, we aim to avoid lawsuits as they can seriously drain any trust’s assets, as well as the energy of the trustee and beneficiary alike.

And yet, sometimes, when serious harm may occur to a beneficiary, the best protection may require court intervention. The first step before actually going before a judge is mediation, which offers all parties an opportunity to design their own solutions, managed by someone trained in dispute resolution. The goal is resolution without a court hearing.

We find, over and over again, mediation to be a very successful tool, especially in cases where there is a great deal of tension and conflict between parties.

We first met Frank, a father of a teenager — whose real name we have withheld — at our Santa Fe office. Frank was both charismatic and brilliant with lots to say on art, culture, history, and his travels throughout Mexico as a photographer, artist and teacher.

The occasion for his meeting with us, however, was complicated — as was Frank — as we would come to know in time.

We learned then how years earlier Frank had created a health, education, maintenance and support trust (a HEMS trust), when his daughter was two years old, naming himself as trustee. We would also learn that it was not a trust solely for Olivia, but a family trust for all of Frank’s children, even though at that time there was only Olivia.

The entire matter, he told us, was now before a judge, because the corporate trustee who had been appointed to replace him, had resigned. It was now Frank’s responsibility to find a replacement.

We accepted the appointment and quickly learned why a judge ordered his replacement.

It started with nothing less than Fraudulent Conveyance! — with the court finding that Frank had illegally sold his $1.5 million home to the trust (depleting the liquid assets in the trust), and then, as trustee, turned around and sold the house, pocketing the funds as his own.

The court threw out the transaction and mandated Frank return the funds to the trust, this is also when a corporate trustee was assigned, but only soon thereafter resigned.

In our dealings we also became acquainted with Frank’s estranged wife, Linda, who suffered from a number of mental and physical maladies, the sum of which left her unable to care for her daughter.

We also had the privilege to get to know Frank’s daughter Olivia, the beneficiary of the trust, our number one priority, and also a resilient and capable young person wholly deserving to be extricated from the myriad problems her parents had created.

And, in another twist, this is also how we got to know a very special horse trainer, Jill — who like everyone in this recollection, is given an alias here.

The story was that Frank had bought Olivia the “grandson of Secretariat” expecting Olivia to become an Olympic equestrian.  But this was not what Olivia wanted and for as long as they had owned that horse, it was Jill who attended to him. When Olivia found she could no longer live with her dysfunctional parents, it was Jill who took Olivia in and brokered a custody agreement with Frank and Linda.

Jill enabled Olivia to attend a school with wonderful teacher role-models and an accelerated curriculum. Olivia also came to benefit from an excellent court-appointed special advocate, Mary, upon whom she could lean on for explanations and strategy in dealing with the myriad legal issues confronting her.

All the while, Frank and Linda’s seven-year ongoing divorce case — a legend within the local legal community for the ever-revolving door of attorneys, guardians, guardians ad litem, court-appointed advocates, guardians, trustees of other trusts, and several judges — was still unresolved.

The miles of pleadings always seemed to involve a sudden discovery of something Frank had done, been ordered not to do, or tried to end-run around, prompting then another round of pleadings, hearings, and unsuccessful efforts to reel him in.

Show cause hearings continued to be set, vacated, and re-set; custody and guardian issues, outstanding economic issues (including a claim that the trust itself was another attempt to conceal community property from Linda) were only further complicated by Frank’s relocation to Mexico, where his manipulations continued from afar.

And then there was our discovery of further acts against Olivia, this time: Guardian Ad Litem Misfeasance! Heritage Trust uncovered that Olivia’s previous guardians ad litem (not her special advocate Mary) had neglectfully agreed to asset divisions that were very much not-at-all in Olivia's interest and needed to be reversed.

You can see this was a massive undertaking, but we pride ourselves on our ability to overcome unusual challenges.

And so, we filed a motion to intervene on behalf of Olivia to raise these issues in the guardianship action, which arose out of the divorce case.

Up-front, we explained to the beneficiary, her horse-trainer/custodian, and her guardian, as well as her father, his lawyers, his wife’s lawyers and the current Guardian Ad Litem, and her special advocate Mary, that our intent was to get the parties to mediation.

Given all the players and all the dynamics, the odds didn’t look to be in our favor. With future hearings, discovery, trials and appeals we had good reason to believe there would be nothing left to divide if and when the dust settled.

We persisted, bringing together all the parties, their attorneys, the guardians, en masse, along with a terrific, retired judge turned mediator, to participate in a global mediation to resolve the heap of legal conflicts.

And despite those long odds, mercifully, in one single mediation we did just that! And in doing so secured, most importantly, a significant sum to remain in the trust for Olivia’s benefit, with a final disbursement upon turning 35.

We were even able to modify the trust, with the court’s blessing, to prevent the problem of the Fertile Octogenarian! — the possibility that Frank (who was well into his 60’s) could have future children that could also be beneficiaries of the trust.  With Frank we just didn’t know what he would try next.  While the modification could not be made 100% exclusively for the benefit of Olivia, we were able to obtain everyone’s agreement that the trust is solely for her benefit, with indemnifications by all the parties. 

Today we are happy to report that Olivia is a graduate student at a reputable university and, by all accounts, excelling. She took on full responsibility for her horse as her pet, and when she’s not studying, or working in the political sphere, she volunteers for a women’s health organization.

True as always, we never know what to expect when we become a trustee, but thankfully, when it comes to protecting the best interest of our beneficiaries, mediation is one very effective tool in our quiver.