Trust Accountings: financial communications
One of the under-appreciated functions of the trustee is as a communicator. Communication opportunities flow from his multiple roles: in investing, in spending, and in taking care of any of a range of projects which the other trust stakeholders often share a vital interest.
The lawyer’s minimum duty of keeping his client “reasonably informed” may not be at the highest end of pro-active and involved communications applicable to a trustee. Perhaps better the variation of the old saw that a good trustee calls back the same day, a very good trustee calls back within an hour, while the great trustee calls first.
One of the key communications involves the trustee’s roles in the keeper of the assets. The minimum standard set by Illinois statute is for the trustee to provide one trust accounting per year. In contrast, the ongoing status of the trust’s assets are understandably of constant keen interest to beneficiaries. What is being paid for? How much is the trustee charging? How are the investments being handled? Are these inflows and outflows consistent with the established policies for distribution and investment?
These are natural questions of a healthy, adult beneficiary. And so, the trustee desiring to achieve success may adopt more frequent disclosures.
Further, a trustee may be well advised to engage in ongoing communications with the beneficiary, some of which may be in advance of substantive trust tasks.
Such best practices may be tied to achieving an inclusive definition of successful administration.
Avoiding Disputes During Administration – or HOW to communicate and build relationships
The stakeholders’ needs and expectations over the length of administration can run the range from enthusiasm to consent to acquiescence down to lawyering-up and filing a law suit.
The trustee-family relationship can be even more delicate if the trustee is known to the family, such as a family member or a hand-picked professional. The honeymoon will last only so long without good attention.
The themes developed so far point to important keys for successful administration, including:
- Build consensus over the vision and goals and activities of the trust.
- Articulate that consensus in specific documents and policy statements.
- Apply sound financial structures.
- Employ deep, pro-active communications.
- Connect on as many levels beyond the merely intellectual as possible.
Those in business or team sports might recognize this approach as “team-building” or “relationship-building”.
There are many who attend to relationship building and repair. In addition to family dynamics professionals, these advisors can include relationship coaches, mediation counselors, as well as elders or other beloved members of the family.
Using wisdom to form good relationships will serve to support trust, respect, and integrity. A successful trust may demonstrate these values.
Leveraging legacy
Legacy is often under-appreciated. This under-appreciation can be evidenced by a range of excuses such as “I don’t have much of a story.” Legacy can also be ignored because it’s perceived as a fluffy non-essential.
In actuality, an individual’s story— and the ongoing unfolding story of a family— is an essential. It may be argued that the legacy is what gives life it’s meaning. Those who have ever participated in a meaningful shiva, wake or other recollection of the departed have witnessed this firsthand.
In fact, one way to understand a trust is as a legal design to manifest the legacy of the trust maker and to assist in furthering the legacy of the beneficiaries. How well the trust accomplishes both may be measures for success.
Acknowledging this reality and utilizing the many tools of legacy can be an important ingredient in the success of a trust. There are countless ways that this can be accomplished. Given the uniqueness of every individual and family, one place to start would be consideration of key legacy questions. Consider a consultation with a legacy professional and other resources.
Philanthropy: attending to others
Philanthropy, or conscious attention to the impact on others, can be considered on one level a form of legacy work. At the same time, it also connects to a trust’s mission and goals and how its assets will be used. Perhaps even more than legacy, generosity and philanthropy invites trust participants to look beyond themselves and to share in a larger vision.
Some value this mindset and activity and would consider it a part of a successful trust.
One of the myths of philanthropy is that significant funds are required. To the contrary, effective use of philanthropy to support successful trust administration can involve very small sums, even a hundred dollars. In addition, philanthropic contributions may be other than financial, such as by donation of time, expertise and talent.
As with legacy, the process can start with some good questions to the family— and expertise is available to help ask those questions and to explore and implement options.
When All Else Fails: Mediation and Resignation
Mediation is the only formalized dispute resolution technique which allows for a win-win solution. And yet, mediation seems to be rarely written into trust documents, and is not yet a mandatory part of many courts’ process.
Perhaps highlighting the obstacles in the way of successful trust administration, the common approach is the so-called in terrorem clause. From the Latin meaning “in terror or fear”, this clause punishes any beneficiary who might dispute the trust document by the threat of complete exclusion from any trust distributions. And so, the beneficiary is to live in fear of being shut out from the benefits of the trust for contesting either its provisions or its administration!
If the parties can agree, mediation can be brought in after the fact. There are a good number of talented professional mediators who focus on estate issues, and can help willing parties achieve the success of a win-win solution.
Mediation can be brought in BEFORE the emergence of a full-blown conflict. In fact, exercising the muscle of mediation methodologies can build the resilience of the trust stakeholders, having them more prepared to better face conflicts. In this manner, mediation approaches can be brought into select meetings.
Finally, the trustee often has the option to resign. This is not necessarily an admission of failure, so much of the reality that there may no longer may be a good fit between the trustee and the family.
Alternatively, resignation may be recognition that the role for a trustee on a particular trust may be temporary or transitional. That temporary role may be appreciated in advance, or not.
The best practice is to consider not just whether the trustees are doing right by the law, but also whether they’re doing the right thing for the family. And so, successful trust administration may involve the trustee resigning.
© 2015 – 2023 Daniel P. Felix, all rights reserved.
