How to Work with Your Trustee/Your Beneficiaries

questionmarkThe Wall Street Journal recently published an article entitled, “The Trouble with Trustees” that outlined the issues that can come up between a trust beneficiary and a Trustee. The article focused on several themes that we’ve seen over the years:

  1. Frustration–a beneficiary is frustrated that they don’t have direct access to trust assets, even though a trust was established precisely to prevent that beneficiary from having direct access to trust assets.
  2. Poor communication – a beneficiary is angry because they don’t feel that they understand how trust assets are being invested or distributed or because a Trustee is not willing to disclose information about the details of a transaction.
  3. Control-a beneficiary is upset because a trust gives a Trustee discretion to make decisions about how a trust is invested or distributed, or when an asset is distributed, even though a Trustee is given discretion because the trust’s Grantor wanted to make sure that the trust could adapt to changing circumstances.
  4. Fees – a beneficiary is upset that a corporate Trustee is charging fees to the trust for their services or upset that an individual Trustee is charging unreasonable fees for their services.

While all of these can be legitimate concerns, sometimes a beneficiary just doesn’t like the decisions that a Grantor made in establishing the trust or choosing the Trustee. In that case, we advise our Trustees to do the best job that they can in communicating with trust beneficiaries and urge beneficiaries to read the trust document and do their best to respect the wishes of the Grantors in establishing it. (We also, of course, advise beneficiaries to seek their own legal counsel for advice on their rights as beneficiaries if we are representing the Trustee.)

In our practice, we frequently advise Trustees on how best to work with beneficiaries to avoid problems if possible. It’s not uncommon, though, that despite the best efforts of all involved, tensions can rise when big decisions have to get made, such as when to sell a house, or how much to sell it for.

Recently, a disgruntled trust beneficiary called our offices to find out what they could do to try and prevent the sale of a house that they (the beneficiary) felt was being sold for too low a price. The truth of the matter is, though, that unless trust beneficiaries can prove that a Trustee is involved in self-dealing (such a purchasing the property for themselves), negligence (such as offering the house way below market price or hiring an unqualified Realtor to handle the sale), or some other kind of illegal activity (like theft), not liking the decisions a Trustee is making wouldn’t be enough to halt the sale.

I told that beneficiary that they had a right to be informed, but not a right to second-guess, and that the Grantor choose the Trustee because that Grantor felt that the person would do their best to make the hard choices that a trust administration sometimes requires. In that situation, a conversation with the Realtor actually set the beneficiary’s mind at ease, because the Realtor was able to justify the asking price on the basis of neighborhood properties that were comparable and because of zoning issues that the beneficiary didn’t know about previously.

In the end, more information and better communication between Trustees and beneficiaries can go a long way toward solving most of the issues that can arise. Not all of them, of course. But it never hurts.