Trusts, Trustees and the Human Factor in Estate Planning


I’ve spent nearly 30 years as a “Trust Officer”, and I cannot count the number of times I’ve tried to explain what that means. Interestingly, I meandered my way into this field by way of several “operational” type roles, reconciling Mutual Funds, 401k Plans, and a few other less than exciting positions. What drew me to Personal Trust Administration? The Human Factor!

What Is a Trust?

Rather than sharing a textbook definition of a Trust, I would offer my own description to give the meaning some practical illustration. We’ve all heard the term “Trust Fund Baby” or, at some point, thought that trusts were only for the Ultra Wealthy. Admittedly, that was my limited belief until I began to do this work.  I would now say that trusts are created in order to accomplish one or more of the following:

1. To provide assurance that what you have accumulated passes to your family/beneficiaries just as you intend, without risk of being lost to creditors or predators
2. To avoid probate of your estate, which is costly, time consuming, and open to public scrutiny
3. To make gifts to those important to you but making sure that the funds are distributed at the time you intend (for example, at a certain age) and for the reasons you intend (buying a home, supplementing income, paying for education, etc.)
4. To leave your loved ones with a road map on how you would like to be cared for in the event you are incapacitated, or how you wish your assets to pass to them when you are gone. This significantly reduces the possibility of fighting amongst your heirs about “who deserves what”.
5. Last, but not least, trusts can provide invaluable income and estate tax benefits

In considering the above, it’s clear that these reasons would apply to most, if not all of us. It’s not about the AMOUNT, per se, rather, it’s about protecting what you’ve spent your life accumulating and leaving a legacy for your heirs. It’s a gift in and of itself for future generations.

What Are the Responsibilities of a Trustee?

Duty to Administer the Trust:
Knowing and adhering to the terms of the trust
Duty of Loyalty:
Trustees must administer the trust solely in the interest of the current and remainder beneficiaries and may not act in his or her own interest.
Duty of Impartiality:
Trustee must act impartially when administering a trust for multiple beneficiaries.
Duty to Account:
All beneficiaries must be kept informed as to all events impacting the trust, including changes of trustee, annual account of the trust
Duty to Distribute Trust Income:
In accordance with the terms of the trust, the Trustee must distribute income as directed, or at least annually.

In fulfilling these duties, a Trustee’s specific responsibilities include the following:

1. Making sure all assets are titled into the trust name
2. Investing the trust assets for all classes of beneficiaries, current and future
3. Sending statements to all beneficiaries at least annually
4. Preparation and Filing of Tax Return for the trust, and distribution of tax information to trust beneficiaries
5. Making sure any mandatory distributions specified by the trust are made in a timely manner
6. Reviewing, documenting, and communicating decisions to a beneficiary on any Discretionary distribution requests by reviewing the trust’s guidelines and requirements

It’s clear that the laws governing trusts, and the trust itself provide an individual with a sufficient set of instructions/guidelines that help to do the job. What is not available, and what I would argue are the most critical characteristics a Trustee should have are Empathy and Conviction. Since a Trustee literally has the responsibility of “standing in the shoes of another”, he or she must be able to both empathize with the circumstances of the beneficiaries and adhere to the terms of the trust (or the wishes of the Trust Grantor) with the strength to be able to say “no” when the need arises.

A Trustee must to be comfortable being “unpopular” in the eyes of the beneficiary when the answer is No. In addition, he or she must thoroughly vet any and all requests for distributions, documenting decisions by obtaining any supporting information from a beneficiary and subsequently communicating the rationale for the decision. This holds true not only for decisions around distributions, but also around Investment Strategy, Tax Reporting, and any other issues that affect the trust.

As I reflect on the many trusts I’ve administered, and the countless Trustees I’ve had the opportunity to work with over the past 30 years, what I have consistently witnessed is that the “best” trusts are those that are crystal clear in outlining the intentions of the Grantor, and the “best” Trustees are those who have been able to carry out the intentions of the Grantor, even when circumstances have changed to situations that a Grantor never could have anticipated. These are individuals with empathy, with compassion, and with the “Human Factor” that enables them to interpret the spirit of the trust as well as the technical terms of it. They evolve their approach to consider the needs, circumstances and challenges of the most precious part of the trust-it’s beneficiaries.

“Empathy is seeing with the eyes of another, listening with the ears of another and feeling with the heart of another.”

~Alfred Adler

Fortunately, there are resources available to Trustees that enable he or she to engage the services of professionals to handle things like the investment of trust assets, preparation of tax returns, and distribution of annual statements and accountings.  As a result, the focus can remain where it should, on the needs of the beneficiaries and carrying out the intentions of the Grantor.  More recently, a practice of leaving a “Letter of Intent”, or “Love Letter to Beneficiaries” has been employed by those creating the trusts so that their “voice” adds additional guidance to both the Trustee and the Beneficiaries.  What better way to share with your loved ones the “why” behind your planning?

Fortress Wealth Planning is registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and Hightower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of Hightower Advisors, LLC, or any of its affiliates.