The Good and Bad News about Trusts
Recently I read with great interest a blog called “Confessions of a Trust Fund Baby” by Caroline Faber, posted May 20, 2013 on LearnVest (http://www.learnvest.com/2013/05/confessions-of-a-trust-fund-baby/). Ms. Faber’s steep learning curve and self-discovery process about who she is, what matters to her and her relationship with the wealth she inherited resonated with my multi-decade experience as an educator and trusted advisor working with trust creators, beneficiaries, trustees and the team of advisors who serve them.
This is not a new topic. Wealth held in trust carries with it both good news and bad news.
On the bad news side of the balance sheet:
• Many advisors see working on multi-disciplinary teams as too risky, fearing they will lose their position of trusted advisor with the client and thereby their control;
• Some trust beneficiaries are limited by the language and structure of the trust to being kept in “short pants,” dependent on corporate and family trustees who may have their own competing agendas about the trusts they manage;
• Often family trustees receive little practical education and guidance about their roles and responsibilities as trustees and are intimidated by the legal and financial documents they are asked to review and approve.
On the good news side of the balance sheet:
• Becoming better educated about the challenges and opportunities their inherited wealth brings;
• Acquiring the skills and experience to assess risk and make effective decisions about their financial, human and social capital;
• Using their financial capital to fund their own entrepreneurial or philanthropic ventures;
• Learning how to communicate effectively with their trustees, attorneys and financial advisors.
Likewise, family members serving as trustees are
• Becoming better educated about how to manage the sometimes confusing roles of trustee and family member;
• Understanding more deeply their fiduciary responsibilities as trustees, including the need for a regularly updated investment portfolio policy and ongoing reviews of the trust funds’ return on investment;
• Realizing the need for clear boundaries and communication with beneficiaries;
• Accepting the role of mentor to the beneficiaries of the trusts they serve.
Trust creators are
• Recognizing the challenges and opportunities inherited wealth brings;
• Exploring options for how to best prepare beneficiaries and family trustees through a commitment to lifelong learning;
• Working with legal and financial advisors who understand the dynamics of managing human, financial and social capital in wealthy families;
• Creating estate plans that are not only tax efficient but also support the sustainable well being of the family and its relationships.
Legal and financial advisors are
• Increasingly aware that creating the estate plan is only the first step to serving their client families;
• More open to a team approach (including specialists in family dynamics) when working with client families;
• Willing and able to mentor family trustees and trust beneficiaries;
• Better educated about the impact of family dynamics on the estate planning and wealth continuity processes.
In Ms. Faber’s case, her intelligence and self-honesty can be credited with saving her from squandering not only her inheritance, but also her life. In her words, a trust fund can be “a dangerous vehicle for self-destruction” when it is simply handed to the beneficiary. While she had to learn the hard way that money is not the key to happiness,
more and more often, trust creators, family members who are trustees, and all of their advisors are not only aware of the destructive potential trusts have, but are purposefully acting to ensure beneficiaries are truly benefitting from the power of their inherited wealth.
And, there is more good news; an increasing number of resources are available to beneficiaries, family and corporate trustees, and the advisors who serve them, including:
• Family Wealth Transition Planning by Bonnie B. Hartley, Ph.D. and Gwendolyn Griffith, Esq., Bloomberg Press 2009;
• TrustWorthy: New Angles on Trusts From Beneficiaries and Trustees by Hartley Goldstone and Kathy Wiseman ( a collection of 25 personal — and positive — stories told by beneficiaries, trustees and their advisors. The book speaks to the human side of personal trusts.);
• A Wealth of Possibilities by Ellen Miley Perry provides a variegated road map of commonsense approaches, anecdotes and profoundly meaningful solutions to many of the most vexing issues confronting wealthy families.
• “The Trustee as Mentor,” by James E. Hughes, Jr. Esq., available as a downloadable pdf on www.jamesehughes.com;
• The Purposeful Planning Institute (PPI) www.purposefulplanninginstitute.com
“Lost in the sterility of the typical legalese of wills and trusts is the love parents and grandparents feel for their children and grandchildren – the faith they have in their descendants’ potential to grow and develop, and the hope they hold for their future.” John A. Warnick, PPI Founder;
• Impact Estate Planning by Michael T. Hartley, CFP® CEO, DKE Inc and Bonnie Brown Hartley, Ph.D. http://flip.it/mrDD7
Curated information about the challenges and rewards of thoughtful estate, life, and legal planning available through the iPad app Flipboard.