By Michelle Burge
Not so long ago, it was a given that family authority passed down by way of the eldest male son. In fact, for most of history, it was the eldest male son that not only become the default patriarch of the family, he also inherited the entire family estate.
The ancient, but long practiced concept is fascinating, and a great study on family dynamics that are still relevant today. While families no longer bequest their entire estate to their eldest male son, nor do they give him all roles of authority, there does seem to be some lingering desire to keep an aspect of this tradition alive by naming one’s children as Executors and Trustees. My clients often voice their concern that in not doing so, their children will be offended by the perceived slight.
In all reality, anyone who has actually served as an Executor or Trustee for a family member will tell you that the job is difficult, time consuming and often pits them against their own family members - most often their own siblings or step-parents. One of the primary motivating factors for the creation of a Trust is to diminish or alleviate potential family conflict, but too often estate planners do not encourage clients to consider the potential pitfalls of naming a family member as a Trustee and causing the very conflict they are seeking to avoid.
Of course there are situations that naming a family member (even the eldest adult son) as the Trustee of a Family Trust makes sense. There are times a certain child or a spouse is the best suited party to take control of property, administer the Trust and distribute the assets. Such an appointment can also be the most economical option for the beneficiaries if an estate is simple, and so are the relationships among the beneficiaries.
However, our office has been involved in far too many situations where a simple discussion between the Grantors of the Trust and their attorney could have alleviated thousands of dollars worth of litigation and an unnecessary family battle. If there are hidden resentments or underlying conflicts between siblings, giving one this type of authority and perceived power over the others only opens to the door to unnecessary and irrational conflict after the loss of a parent. Losing a mother or father can be a complicated and intense period for many. When you add money, spouses, personal financial problems
and unrealized family dynamics - the recipe for conflict is ripe and the makings of a perfect storm begin to brew. All of this can be avoided by the right conversation between the estate planner and the clients.
More obvious than sibling disputes are those between step-parents and adult children. Nonetheless, time and again, adult children are named as the Trustees over their parents’ surviving spouse’s Trusts. The parties are pitted against one another before administration even commences. It is almost always the case that the Trustee (and his or her siblings and children) stand to inherit what the surviving spouse doesn’t spend. Of course the surviving spouse is suspect when the Trustee declines a distribution or
suggests a Mediterranean Cruise with her entire extended family is not an appropriate trust expense.
I am currently representing a woman who was named as the Successor Trustee of her Aunt and Uncle’s Trust. She commenced acting at a time when her Uncle was on hospice care and completely bedridden due to complications with MS and her Aunt was dying of advanced stage cancer. The couple had no children and ran a farm. Seeing the severity of their own conditions and their need for assistance, the two sought out an excellent estate planning firm and had a Trust drafted granting their niece expansive authority as Trustee with the express intention that she be able to administer their Trust in her complete discretion. They even went so far to ensure she was well protected and free from potential family conflicts that they included a unique provision allowing her to gift the entire trust to herself, or anyone else, as she saw fit.
Nonetheless, upon the death of her Aunt and Uncle, the Successor Trustee was sued by minor beneficiaries of the Trust. The majority of the couple’s Trust was to be divided between the Trustee niece and two charities. However, two beneficiaries who stood to inherit less than 1% each have held-up the administration of this Trust for over 18 months. They have asked for endless accounting documents, served discovery, pushed for depositions and depleted not only Trust assets the Grantors intended to pass to their beneficiaries, but also put my client in a position that she has had to pay the costs of her
defense – personally.
The couple knew the family was an issue and that such a lawsuit was a risk. According to the drafter of the documents, the Aunt and Uncle discussed the pros and cons of including them as beneficiaries at all, but ultimately decided leaving them a small bequest may alleviate some of their animosity and keep a lawsuit at bay. Clearly, that calculation was wrong. And in return for caring for her dying Aunt and Uncle for 18 months, putting her life on hold to live with them, getting up with them in the night, managing their farm, and tending to their needs as they had requested, she is now embroiled in litigation and has lost a significant piece of what they intended to go to her by way of attorney’s fees. What has happened here is the absolute exact opposite of what this couple wanted to happen with their Trust and Estate. Their goal was to have this niece generously rewarded for her care of them. They conveyed their concerns to their attorney and had provisions built into the Trust to that end. Nonetheless, here we are.
My Trustee may not be the eldest adult male, but it does seem her Aunt and Uncle named her as Trustee to demonstrate to her, and to their family, that she was the party they trusted the most and had the most confidence in caring for them and their needs. And while there is some significance in that recognition, I can assure anyone that my client would have strongly preferred for her Aunt and Uncle to have named an Independent Trust Company to have acted - either with her, or alone, as she worked as Trustee and
then had to turn around and administer this Trust upon their deaths.
How could this have been avoided?
By acknowledging that the position of Trustee is not an honor. It’s not an acknowledgment of the Grantors’ feelings for the Trustee. It is a job, and one that is far too often best suited for a professional trustee. The bottom line in the above referenced case is that the beneficiaries that sued their cousin, the Trustee, is one of family discord and animosity. There is some deep, deep resentment between the beneficiaries that filed the lawsuit and the Trustee. Maybe they think the Aunt and Uncle should have asked them to care for them. Maybe they think they would have done a better job. Maybe they think my client didn’t keep them well enough informed. Maybe one of their spouses has a long-standing grudge against my clients’ spouse. Maybe none of their kids get along. Maybe one Christmas decades ago there was an altercation at the dinner table. Anyone who is a member of a family knows that families are complicated systems with all kinds of layered resentments, misunderstandings and hostility. Add death, money and power to the equation and it’s certainly foreseeable that naming anyone as a Trustee can open a proverbial can of worms that will do nothing but cause heartache. Slights that seem minor become magnified.
Clients occasionally voice a concern about the costs in naming a family member as Trustee over a professional institution, but the vast majority of the time, they are surprised to learn how reasonable the rates of local trust companies can be. But the emotional and financial costs of Trust litigation are beyond measure. And that’s just those conflicts that find their way to the attorney’s office. I cannot even imagine how many families administer trusts and instead of those resentments leading to the door of a law firm, they instead fester and boil for years.
Families should be advised on the risks of naming family members as Trustees as a standard part of their estate planning, we will have that discussion here at Smith Coonrod Mohlman.