and Granddaughter learn that Grandma and Grandpa created trusts for them.
But it becomes clear rather quickly that Grandson and Granddaughter's trusts are really best understood as “tax strategies.”
The incidental beneficiaries of these tax strategies are very confused when they leave the lawyer's office.
Grandson and Granddaughter meet with their trustee. The trustee is wise.
The trustee explains: “The lawyer created an estate plan for your grandparents that is first and foremost a legal relationship – one that only happens to involve human beings.”
He continues: “Together, we will transform that legal relationship into a blossoming human relationship – a relationship among us that only happens to take place in a legal environment.”
The trustee was not always wise. When he started out, like many trustees, he thought his job was to administer a legal relationship. He had his compliance manual, his audits, and his policies and procedures.
He wondered to himself why the beneficiaries he served were so unhappy. He knew that this was not what trust creators would have wanted for their loved ones.
One day he decided that “from today forth, I will administer trusts in a way that will enhance the lives of beneficiaries. The trust will be a resource to help them reach their potential, at whatever level their potential happens to be....”
The authors, along with colleagues who share a similar outlook, have seen versions of this “fable” come to life, now and then, here and there. It always comes down to someone saying, “Let's take this legal relationship that only happens to involve human beings, and turn it into a human relationship that happens to take place in a legal environment.” We're here to make the case – to you and yours – for the practical wisdom of this insight.
There's much at stake for our clients and their families – a good deal more than preservation of financial assets.
INTRODUCTION
KeithWhitaker
Many years ago a member of my family asked me to serve as a trustee for a personal trust she had established. I agreed without much thought. It felt like a pro forma sort of thing: a document needed signing, and I was willing to sign it.
I had a lot to learn.
In the years since, I have served, paid and unpaid, as a trustee of many personal and charitable trusts as well as a director of or adviser to foundation boards, business boards, and private trust companies, for my family and for others. I have seen the great good that trusts can do, and the great harm. I have had the pleasure of working with generous grantors and grateful beneficiaries. I have had the displeasure of dealing with lawsuits over trusts that have torn apart families and friendships.
Along the way I have learned a great deal from other trustees, beneficiaries, and numerous advisers. One thing I learned is that my initial experience was not unusual. Few people begin service as a trustee with much clarity about what it entails. Most trustees begin as I did, wishing to do a favor for a family member or friend, unaware of the complexities and the opportunities that trusteeship brings with it.
For such trustees, the standard handbooks in the field —Loring & Rounds or The Third Restatement of Trusts– are amazingly rich but often too specialized. Coursework, such as that offered through the American Bankers Association, can help. But there has been no truly practical resource for the great majority of individual trustees.
Hartley, Jay, and I wrote this book to benefit any member of the “trustscape” (as explained in Part One) who finds him- or herself in a situation similar to mine those many years ago. You, our readers, are trustees, would-be trustees, beneficiaries, trust creators, or advisers who are conscientious and want to do the right thing. You may or may not have legal or investment expertise, but even if you do, you realize that your expertise may not completely prepare you for living with a trust. Most importantly, you recognize that your goal is to deal with that trust not only correctly (that is, in compliance with law and regulation) but above all well, namely, for the true good of all the people affected by it.
In writing this introduction and serving as a trustee, I have been guided by the belief that trusteeship is far more than a matter of administration. Even if unpaid, it is a noble profession. It is similar in this way to the noble professions of medicine, law, teaching, and the clergy. This means that even if a trustee performs his or her duties only a few hours a week or month, still, in those few hours, he or she is serving in a tradition that stretches back centuries and that has an inner worth of its own.
Principles
The rest of this introduction will say a few words about the principles that underlie the noble profession of trusteeship; it is meant to inform trustees, beneficiaries, and trust creators. It will also connect these principles and thoughts to the chapters and sections of the book that follows. In the main body of the book, Hartley, Jay, and I will outline practices and activities by which members of the “trustscape” can put these principles to work. If you would like to skip right to the practices, please feel free to jump to Chapter 1. If you would like to have a better understanding of our principles, then read on.
The five principles discussed here do not replace the traditional duties of the trustee, such as prudence, care, impartiality, and so on. Instead, what I have sought to do is to uncover some of the aspects of what we have elsewhere called the “fiduciary character” that makes any individual trustee the type of person who will fulfill these duties.2 What trusteeship looks like will vary from time to time, place to place, and situation to situation. What makes up its core persists over time, place, and situation to give shape to the work amid changing circumstances.
This is the first principle of every noble profession. Doctors swear it in the Hippocratic Oath. Lawyers, teachers, and the clergy have their own versions, spoken or unspoken.
This principle reminds us that trusts and trustees can do harm. Trustees have an intimate relationship with the other parties to a trust. We see confidential financial statements. Depending on the circumstances, we may be privy to confidential personal information regarding health, drug use, or other private behavior. Not honoring this “trust behind the trust” smashes the relationship to bits.
Sometimes doing harm takes on more subtle forms than exposing confidential information. Many trustees find themselves beset with “trust fund babies,” that is, beneficiaries who live without work or purpose, dependent on their distributions. Is money the problem, “the root of all evil”? Or is family dysfunction the cause? Both may have a part to play. But the most common sort of trusteeship – tight-lipped, communicating only the bare necessities, winnowing down our relationship with beneficiaries to an annual letter along with the distribution checks – may also be a cause. The flip side of paternalism is infantilization. If we treat adults like children, it should be no surprise that we produce childish adults.
Not doing harm requires constant vigilance. That is why throughout this book, especially in Part Three, we emphasize practical ways that trustees and beneficiaries can develop strong relationships aimed at beneficiaries' growth.
After all, trusts and trustees can also do much good. The decisive difference lies in intention. Doing no harm is the first expression of what the Buddha called “right understanding,” the
