Discretionary trusts and executors disputes

An extremely important point to consider when you make a Will, the significance of which is often overlooked, is who to appoint as the executors of your estate. This is a particularly important consideration when a discretionary trust is involved.

Ultimately, it is the executors who will administer the estate. If more than one executor is appointed they will need to cooperate and work together to efficiently handle your assets, ensuring that the beneficiaries receive their entitlement.

If there is friction between executors, then substantial problems can arise. This can lead to the administration of the estate being delayed. And if court proceedings are required the legal costs of any litigation can cut deep into the value of the estate.

These problems can be amplified when a discretionary trust is involved. A very recent example of this is the estate of the much celebrated British-Iraqi Architect, Zaha Hadid. The designer of the London Olympics Aquatics Centre, Guangzho Opera House and many other buildings across the world, left an estate worth £67 million.

A Will was made, appointing Zaha Hadid’s business Partner, Patrik Schumacher, her friends, Peter Palumbo (a property developer) and Brian Clarke (an artist), and her niece, Rana Hadid, as the co-executors of the estate.

The Will provided for legacy of £500,000 to be left to Patrik Schumacher and a further £1.7 million to be divided between four nieces and nephews, as well as her brother, Haytham Hadid.

However, the bulk of the estate, comprising property, business interests and the international architecture business, was left subject to a discretionary trust. This means that it is for the executors to determine how to distribute the estate amongst the potential beneficiaries, who include family members, charities, the Zaha Hadid Foundation (a charity established by the deceased personally) and “past, current and future employees and office holders” of her companies.

The Will specified that should any portion of the estate that is subject to the discretionary trust not be distributed within 125 years, then it will automatically pass to the Zaha Hadid Foundation (whose current trustees are Peter Palumbo, Brian Clarke and Rana Hadid).

On 14 November 2018, Patrik Schumacher issued a claim in the High Court, to remove the other three executors from their posts, leaving him as the sole executor.

That claim is being resisted by the other executors, who argue that they were appointed specifically by the deceased because of the closeness of their respective relationships with her, and that Patrik Schumacher is seeking to gain financially from the estate by taking this action.

Clearly, there are significant issues between the executors and substantial differences in their views on how the estate is to be distributed. With court proceedings being issued, the estate administration is going to become severely delayed and the legal costs of a High Court claim (particularly given the value involved) will be sizeable.

We specialise in executor disputes, including discretionary trust executor disputes, handling cases throughout England and Wales. So, if you are involved in a dispute relating to the executors of a deceased person’s estate, as a named executor or as a beneficiary of the estate, then please contact our specialist team on 0808 139 1599 or send an email to us at info@inheritancedisputes.co.uk