FOXCast: Mindfulness around the Trustee/Beneficiary Relationship

In this episode, we check in with Ruth Easterling, Managing Director of Member Services at FOX on the importance of developing a strong trustee/beneficiary relationship.

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Below is a transcript from the conversation:

KC: You work with many different types of families, just to give the listener some background—some have recently had a liquidity event, others are multi-generational, business-owning families growing in complexity. And there have recently been a lot of conversations between the members here at FOX about trusts—the language around trusts. Can you talk about the relevance of this for families as they establish a trust?
 

Ruth Easterling: Sure, thanks. It is such an important conversation and it came up on one of our peer chats as a member was asking about the ramifications of specific trust language. And as you step back and you think about a trust, when a trust is formed it’s more than just a legal document, it creates a relationship between the trustee, grantor, and the beneficiary. And the dynamics of that relationship really need to be honored. It’s important to really consider what is being formed when you have that relationship and an understanding of what the intent of the trust is.
 

KC: So, it sounds like that relationship, from what you told that member and from everything that's been said here at FOX, that relationship is just critical—having a strong relationship, a trusting relationship between trustee and beneficiary. What do you tell families that ask you about that?
 

RE: Well, it really begins with the family and the family culture and the dynamics in that family, and it's about education and beneficiary development—not just at the time that the trust is created, but hopefully throughout their lives. And certainly, you can start at any point and try to nurture what that relationship will look like, but also the beneficiaries’ relationship with the wealth, the relationship with the family, and the relationship with themselves and moving forward as an individual. 

The part of what you really want to develop for any individual, of course, is cultivate independent, productive, and meaningful lives—that embraces the family’s values, their goals, and strategies. So, if you have that context and then there's a discussion about a trust and what that trust might mean, there's a foundation from which to work and for the trustee and beneficiary to have a meaningful conversation about: what is the intent of this trust and what is it bringing to you as an individual? But also, what are the expectations of you as an individual and what are the expectations of the trustee in serving as a fiduciary with oversight to that trust?

KC: So, what are some of those best practices between trustees and beneficiaries in developing that relationship? 
 

RE: Well first trustees, or actually anyone who's involved with the beneficiary, really should be paying attention to the trust documents and reading them. And that seems like a very straightforward and obvious type of action that someone would take, but oftentimes, it’s not really fully understood (the impact of the document). And the reason for that, is that another really critical part of any trustee/beneficiary relationship is that the trustee has intentional planning towards that relationship. And that means that part of developing a beneficiary is more than just sitting down and having a coffee with them and saying, “hey there's this trust document and I want you to be aware of it. And if you have any questions. Let me know.”  And sometimes it's really viewed that casually.

From the beneficiary perspective, that can be a bit overwhelming or unclear and they really don't know what questions to ask, or how to interpret what this trust is and how it will impact their lives. Just coming with an open mind about learning and understanding about the role of the trustees, is really critical part of that relationship. Understanding that the trustee isn't there to necessarily wave a club over them, as much as they are there in a role that it's been assigned for a specific purpose. And again, sometimes the dynamics of that relationship can be complicated, depending who the trustee is and what that relationship may be. So, that might sound pretty simple but sometimes it can get a bit complicated.
 

KC: Can you provide any examples on the types of complications that typically arise? 
 

RE: I had the great honor working with a family member at FOX—and this went on public record, so I can share a bit of it. But in this case, the family member was actually in her 40s before she learned that she had a very, very significant trust. And it really disrupted her life, in the sense of unexpected information and not having clear communication and feeling prepared. And yet, there had been earlier conversations that alluded maybe, to some type of trust, but yet there had never been really intentional planning. And when the information was given to her, it was done somewhat casually, such as, “by the way, you have this trust and it has this value to it.” And then she was left to disseminate and figure that out for herself and what it meant for her as an individual and a beneficiary of this trust. And she really struggled with issues of deserving this, because she hadn’t earned it or worked for it, and what was she supposed to do with this? And there was no immediate follow-up to that. But the beauty of that situation was that she became very engaged in her family and is very active now in the family council, in making sure that there is beneficiary development. And also, of course, with her own family. 

But those real situations do happen, and I think oftentimes people think, “well, how can the news of a wonderful trust be a burden to someone?” But, very much so, it can be. And that is where this conversation really stems from, is the importance of really bringing together the needs of the beneficiary with the responsibilities of the trustee.
 

KC: And I think it touches on transparency [in the distribution process] and just having that open conversation with all the family members. Can you talk a little bit about the importance of that?
 

RE: So, the distribution committee is a really essential part of a best practice, too. And that is because, in the distribution committee, you'll have the trustees sitting on the committee—you may have a couple of family members and a non-family member who may be the trustee or not. And they'll be reviewing, as required, requests that may come in for distributions that may not be the normal process, or a special request that comes through. So, from a beneficiary standpoint, if they don't really understand the role of that committee, and what they're doing and why they're doing it, or how they need to evaluate those requests, then it may be a very anxious process to go through. Because they're hoping to put forth a request that might, from their viewpoint, help them have a better life or obtain something they would want—whether it's a house, or maybe a new business, or some type of request. From a trustee standpoint, they're looking at it from: how does this align with the trust? What are the requirements as a fiduciary? Is this the best practice? How is this helping this family member, again, move forward in their life in obtaining what they need to be a well-balanced and contributing part of the family?

So, it becomes a really important conversation between the trustee and beneficiary to understand this distribution process. And how does that work? And, in an ideal situation, you've got that trustee kind of mentoring them around the process and the request. So that if something comes back, there's questions. It's not a personal thing about the beneficiary, in terms of not wanting to provide for them as much as, one, meeting these requirements, but also, understanding what they're trying to accomplish. And then maybe their initial request may need to come back and be reformed. And that's where the trustee, again, through good conversations—and those conversations get formed because they had the time together, they've spent time, there's been some education … But those conversations can be more meaningful, then, about helping them obtain what they're trying to accomplish. And maybe it'll come back in the form of the initial request, or maybe It’ll come back in a different way. But at the end the beneficiary doesn't feel as though they've been shunned, as much as they’ve walked through a process of education. 
 

KC: Talk about what type of guidance FOX can offer families on improving and developing that strong trustee/beneficiary relationship that's so important. 
 

RE: Sure. Well, we have a couple of things. One, we have the Private Trust Company Network, which you referenced so nicely in the beginning, which is a [member-only] forum where we do focus on private trust companies, but this conversation does come up. 

Secondly, we do have the Trustees and Beneficiaries Workshop, which is a wonderful two-day workshop that would just focus on this relationship. What’s so strong about it, is that it covers both the technical as well as the soft issues. And by “soft,” I don't mean that they’re not important, as much as that they’re not as black-and-white. They’re very subtle but influence the outcome of that relationship. 

KC: What I always thought was great about that Workshop is that it’s something that the trustee and beneficiary can do together. And it’s a very comfortable place to learn together—it makes sense and you’re being guided. 
 

RE: And it does open the doors to conversations and questions, which are important. So, I think it allows for that flow of information and that relationship to develop, and it can do that. And also, the family conversations … We had one family, and this was very inspiring—they sent someone to the workshop, and they were so impressed with it, they actually got 40 family members together and spent their family meeting that year doing beneficiary/trustee education and development. And they had people from [age] 12 to their 70s or 80s in that room. And it not only helped bridge relationships and educate, but it really brought together the family, as well, in terms of a culture of understanding this relationship and its importance. 
 

KC: Can you tell someone how they could contact you or work with you? What do you have coming up?
 

RE: Well, they can feel free to contact me through FOX at any time. I’m happy to have a conversation. Also, happy to connect them to individuals in our group that are great experts on this topic. And coming up, well, we just finished our PTC workshop this year and we’ll probably be planning another one next year, and that's always a wonderful thing. 

And in just another week, we're having a webinar on Results-Oriented trusts: Balancing Settlor Intent with Beneficiary Needs. And while that will speak to the specific type of trust, of results-oriented trusts, the center-stage of that is language. And impact of language, of a trust language, on the beneficiary. And at the same time, respecting the grantor’s wishes that they want to be sure that the trust funds are used in the right and appropriate manner. So, that's a great opportunity for folks to learn a bit more on this topic.
 

KC: And that Webinar is on May 8. For more information please visit www.familyoffice.com. And the PTC Workshop is the Private Trust Company Workshop (we talk in a lot of acronyms here). But that's the Private Trust Company Workshop and you can find out much more information about that on our website as well.