Estate Planning - Is Your Trustee Trustworthy?
How did wealthy Aunt Sally's bequest of $500,000 a year to help stray cats end up going to The Foundation for the Preservation of Home Brewers after she was gone? She had both a will and a trust explicitly spelling out her wishes that were supposed to be followed in perpetuity.
Stewardship is a lost art. As an estate planning attorney I am charged with preserving my clients' intents through various documents, such as wills, trusts and charitable foundations. I guide clients on selecting experienced, competent and reliable fiduciaries. I follow through to know that my clients' estate planning trusts are funded before death to avoid unnecessary probate administration.
A recent New York Times piece reminds me how important it is for me, an estate planning attorney, to see that my clients' wishes are preserved, not perverted by the corporate greed that pervades the corporate estate and trust administration industry.
The Times article shows how many irrevocable trusts, charitable trusts and private foundations are administered by stingy corporate trust giants more interested in collecting fees than serving the wishes of those no longer here. Why give the money to charities? It will only reduce trust fees.
But that is not even the worst part. According to the Times, the wishes of clients are often changed to reflect the wishes of the administrators. The charities specified in the trusts are replaced by charities chosen by administrators as more appropriate. Generous gifts become less so, or even disappear. Why?
Why indeed. The trust industry in the United States got its big start in Boston over 200 years ago with the First National Bank of Boston in 1784. The bank was chartered to serve the banking needs of ship captains, mainly whalers and Far East Traders.
Often the ships would be gone for over a year at a time while the captains' families stayed behind in Massachusetts. As a result, Boston trust lawyers and trust companies were charged with preserving and protecting the wealth of the merchant fleet. Massachusetts developed a great body of trust law, that to this day is unrivaled in any other state.
Silent among those laws is a clear definition as to what a reasonable action would be by a trustee. Certainly the trustees must act reasonably. But because most estate planning attorneys draft trusts with the broadest of fiduciary powers, theses same discretionary powers are often the tool of self serving corporate trustees. The cure? For one, clear language is a good start. I am a strong advocate among the Massachusetts Bar for clear language in all estate planning documents.
Our law firm is partial to English, as opposed to legaldygook, for all our estate planning documents. If you cannot understand the plain meaning of a document after carefully reading it once, it is not clearly written. Secondly, we are proponents of using co-trustees or trust protectors on all trusts and foundations. In this way, there are checks against outrageous unrestrained abuse of power by trustees as outlined in the Times article.
Last, and most important, we provide for removal of the trustee in all of our trust planning, should that trustee fail to perform fiduciary duties. Provisions are made that such a trustee can be replaced by one willing and able to do the job consistent with the language of the trust and the wishes of the client.
