Jagged Edges
Beneficiaries often learn about the restrictive provisions of their trusts and of the grantor’s wishes only after his death. This situation can invite acrimony if the beneficiaries do not share the grantor’s investment philosophy or accept his choice of trustee. Attorney Leonard Witman of Witman, Stadtmauer & Michaels, a Florham Park, N.J., firm specializing in estates, has seen this situation numerous times. “Dad had assets mainly in bonds. Dad dies. The children are in their 30s. They want the fund to be invested in go-go investments and aggressive stocks because they’re so young, but the bank says, ‘Under the prudent-person philosophy, we want to continue with a conservative strategy.’”

Furthermore, Dad probably chose a trust bank near his final home. The beneficiaries, however, may live in another part of the country, making it inconvenient to meet with the trustees their father selected. Geography aside, Witman adds that the beneficiaries sometimes clash with the trustee simply because of their personality differences. “Maybe the person handling the assets got along very well with Dad,” Witman says, “but he doesn’t get along with the beneficiaries.”

All these potential points of conflict—investment strategies, geography, personality—can be frustrating for both sides of the trustee-beneficiary relationship. As the beneficiaries attempt to carve out more control over the trust, they are often rebuffed—which is precisely what the grantor may have had in mind. “Often, that is exactly why the person setting up the trust named a tough trustee—to make sure the assets are not dissipated,” says Martin M. Shenkman, a trust attorney in Teaneck, N.J.