Trust management is one of the most effective tools for intergenerational wealth planning, which, by its very nature, settles the fate of assets for a long period of time. Over such a long period of time, life events inevitably occur that create conflicts not only on a personal level, but also in terms of assets. These events are stressful in themselves, but the situation can be significantly exacerbated if a dispute arises between the parties over the settlement.

Trust management does not automatically resolve these conflicts. On the contrary, if the contract and the related legal environment are not properly prepared, the trust may easily become the focus of the dispute. In such cases, the question arises not only as to “who is entitled to what,” but also as to the legal basis and means by which claims can be enforced.

For this reason, when planning a trust, it is necessary to take into account not only ideal life situations, but also typical unpleasant turns of events. This article examines two fundamental situations: divorce and the death of the settlor and the most basic inheritance issues associated with it. These are the points where a forward-looking structure can reduce conflicts, but an incomplete one can easily exacerbate them.

The status of trust management in the event of divorce

In the event of divorce, one of the first and most important questions is the legal status of the assets placed in trust management. This is because, after the transfer of assets, the managed assets are no longer part of either the settlor’s separate property or the spouses’ joint property. 

If there is no marital property agreement between the spouses, the rules of the statutory property regime apply. In this case, it is particularly important whether the transfer to trust management was made with the appropriate consent of the other spouse and whether it infringed on their rights to the joint property. If the disposition of property is disputed in this regard, it can lead to serious settlement conflicts during the divorce.

If the parties have entered into a matrimonial property agreement, the focus of the examination shifts: it must be assessed whether the transfer to trust management was in accordance with the provisions of the agreement. In this case, the property agreement may determine not only the origin of the property but also its fate in the event of divorce, thus playing a key role in the assessment of the BVK.

From the point of view of divorce, not only the legality of the property arrangement but also the position of the beneficiary is decisive. The position of the non-disposing spouse may still be sensitive even if he or she is designated as a beneficiary under the trust agreement.

Since the spouse who made the disposition is a party to the contract, the rights of disposal are typically concentrated in his or her hands, which can result in a unilateral decision-making position in the event of divorce. In practice, this means that, in the absence of appropriate contractual restrictions, the spouse who made the disposition can remove the beneficiary spouse from the list of beneficiaries.

For this reason, it is advisable to treat divorce as a possible life event when concluding the contract. It may be necessary to apply provisions that limit the exclusion of beneficiaries or at least make it subject to predetermined conditions. In this way, trust management does not become a source of conflict during divorce, but on the contrary, provides a predictable framework for settlement.

Death and the question of the compulsory portion in trust management

The death of the settlor is one of the most sensitive issues in trust management. In practice, many misunderstandings arise from the fact that assets placed in trust are no longer part of the estate at the time of death, but this does not mean that they become “invisible” from the point of view of the compulsory portion.

When determining the basis for the compulsory portion, the assets placed in trust by the testator within 10 years prior to his or her death must also be taken into account. Accordingly, depending on the specific circumstances, the value of the assets under management may be included in the basis for the compulsory portion.

In practice, some of the persons designated as beneficiaries in the trust agreement may also be heirs entitled to a compulsory portion. However, the legislator has expressly taken into account the situation where a person cannot assert the same property claim under several legal titles at the same time. Accordingly, if the beneficiary asserts a claim against the managed assets not as a beneficiary but under another legal title, such as a compulsory portion, the beneficiary’s entitlement ceases. This rule makes it clear that the beneficiary must choose: either to assert their claim within the trust structure or outside it, but not both.

However, this situation often leads to conflict between beneficiaries and heirs entitled to a compulsory portion. Beneficiaries assume that the assets have been “removed” from the testator’s estate, while heirs base their claim to a compulsory portion on precisely these assets. In such cases, the dispute is not primarily about the legitimacy of trust management, but about the legal basis and extent to which the compulsory portion can be enforced.

The problem is further exacerbated if the trust management agreement does not expressly address compulsory portion claims. If it is not settled in advance from what source and in what manner the compulsory portion will be satisfied, the conflict can easily be transferred to the trustee and the entire trust property. This can result not only in a legal dispute, but also in the impossibility of continuing the trust.

The issue of the compulsory portion should therefore not be dealt with retrospectively, but should be explicitly planned in advance. Trust asset management may be suitable for handling claims arising from the compulsory portion in a structured and predictable manner, but only if the settlor takes this into account when setting up the structure. Otherwise, trust asset management will not mitigate but rather exacerbate inheritance conflicts.

Final thoughts

Divorce and inheritance are not extraordinary events, but life situations that are almost certain to occur sooner or later in the case of a long-term trust structure. For this reason, they should be considered not as retrospective problems, but as risks that need to be planned for in advance. The question is not whether these situations will arise, but whether the trust structure is capable of handling them.

The legal institution of trust management is relatively new, and the related judicial practice is still evolving. This gives increased importance to contractual provisions. We cannot rely on a later interpretation of the law or considerations of fairness to “rectify” any conflicts that arise. What is missing from the contract cannot usually be added later. It is therefore particularly important that the trust agreement is drafted with appropriate professional support and in a conscious and forward-looking manner.

An equally important question is who will fill the role of asset manager. Divorce and inheritance are typically situations where personal involvement and family dynamics can easily override the original intentions. It is in the long-term interests of the settlor if the trustee is able to act as an objective, independent party who consistently adheres to the provisions of the agreement. Therefore, in practice, it is often justified to involve a professional trustee rather than relying on family members.