Beware the Boilerplate: Lessons from Donald vs. Shelly Sterling0

The recent battle between Donald and Shelly Sterling over control of the Los Angeles Clippers basketball team provided a valuable lesson for clients who have created trusts, or are considering creating trusts.  Not only is it critical for those who create trusts to understand the dispositive provisions of their trusts, but they also need to understand the so-called “boilerplate” provisions included in their trusts.

“Boilerplate” typically refers to the standard provisions that are included in legal documents such as contracts, trusts, powers of attorney, and wills.  In trusts, the boilerplate language usually refers to procedural and more general provisions concerning various aspects of the trust and how it is to be administered.  However, in the Sterling situation, the case turned on the meaning and use of certain “boilerplate” language.

The critical “boilerplate” language in Sterling dealt with the way in which a trustee would be deemed unable to continue to act as trustee of the trust.  The court determined that the trust language was clear and its procedures properly followed by Shelly Sterling.  As a result, Donald was deemed incapable of continuing to act as trustee.  This allowed Shelly to proceed and sell the Clippers for $2 billion to Steve Ballmer, which was in the trust’s best interest, and which avoided the NBA seizing control of the team.

One valuable lesson learned by the Sterling case is that those who create trusts need to understand the “boilerplate” language in their trusts, including provisions like the ones at issue in the Sterling case.  These provisions are designed to address situations that may arise in the future, and chances are that some of them will not be applicable to a given person’s situation.  However, there is no way to predict which provisions will become at issue in the future, which is why it is critical for those who create trusts to understand these provisions and ensure that they accurately reflect their intent.

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