Luckily, the provisions of his trust, which had been set up for him by his father and his uncle and aunt, allowed him to replace the trustees who managed it. That is exactly what he did. Last fall, Robert designated a small financial advisory firm, Charles D. Haines in Birmingham, Ala., to oversee the trust. Now, he says, “it’s invested more aggressively to meet my needs.”

The kind of frustration that Robert felt with the trustee overseeing his money is fairly common. “There’s a natural resentment of somebody managing money we think should be ours,” says Richard Kahn, a trust attorney and partner at the Florham Park, N.J., law firm Pitney Hardin. “Probably in 25 percent of cases, there’s somebody that [trust beneficiaries] would like to be able to fire, whether they can or not.”

Many trust beneficiaries do in fact feel they cannot make the leap from frustration to termination for various reasons, says Wil Heupel, a coprincipal at Accredited Investors, a wealth management company in Edina, Minn. “Individuals often do not actually fire their trustees because of the hassle and the cost involved, and feelings of uncertainty over whether they could actually succeed at it.”

Yet, beneficiaries can take control of their family trusts, either by replacing trustees or, at least, by redefining their working relationships with them. In fact, exerting control over a family trust by replacing a trustee can be relatively painless, depending on its provisions and the laws of the state of residence. For example, if the trustee in question is an institution, a simple request for change may suffice.

But other methods of taking control of a family trust can prove more difficult, and could require mediation or even legal action, particularly in situations in which family members disagree or when trust provisions are restrictive. “Mediation and arbitration are becoming more common in this area,” observes estate attorney Mark A. Shiller, of von Briesen & Roper in Milwaukee.

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.

Many beneficiaries, however, chafe under such restrictions. Over time, as succeeding generations of family members demand greater say in how the trust is managed, the relationship can become positively rancorous. When the unresponsive trustee is a family member—for example, a child who oversees a trust for his siblings—the situation often becomes even more difficult. “That person may see their job as trustee as doing what Mom and Dad wanted,” Shiller says.

TOP VIEW Wresting control of a family trust from an appointed trustee can be as simple as filing a request with the institution that oversees the trust. But many times, this process is much more complex, expensive and angst-ridden. In difficult situations in which beneficiaries and trustees cannot agree on a solution for altering their working relationship, judges and arbitrators can step in to hammer out a binding resolution.

Such is the case with Susan, a woman in her late 40s who lives in the New York area. She moved to fire her younger brother as trustee of a life insurance trust two years ago, after he hesitated to perform actions she requested. First, as trustee of another life insurance trust, he delayed transferring proceeds to her son’s college trust, pushing the date past December 31 and forcing Susan to pay an extra year’s taxes. One year later, Susan had a three-week window of opportunity to revoke another insurance trust that had been performing poorly in order to retrieve her premium. Fearing that her brother would again stall, she asked him to resign as trustee. “He absolutely refused,” she says. So she invoked a provision in the trust allowing her to name a third party, a trust protector, to fire him. “Our relationship really was altered,” Susan admits. “I’m angry at him. I’ve spoken to him about other things only when I have to.”

Last year Shenkman asked his 83-year-old mother to resign from a trust for his three grandchildren. She was mentally alert but, as Shenkman puts it, “I thought it best to make the transition while she was able to sign documents without an issue.” The paperwork totaled one paragraph, and his sister replaced her.

Change Management
Robert, Susan and Shenkman all had it relatively easy. All three could enact provisions in their trusts to allow them to make needed changes, and only one faced resistance. “We feel pretty strongly that if the client doesn’t want us, then we don’t want to tie the client to us,” says Gail Cohen, general trust counsel at Fiduciary Trust International in New York, which manages roughly $4.5 billion in trust accounts. Cohen adds one caveat: “If there is an appropriate trustee who can take over.”

Jeff Stuerman, vice president at A.G. Edwards in St. Louis, explains that if a beneficiary removes a corporate trustee, he must typically replace the trustee with another corporate entity. “This is a protection for the family against, for example, an 18-year-old beneficiary naming his buddy as trustee,” Stuerman says, “and telling him, ‘Give all the money in my trust to me.’” He recommends that beneficiaries start by simply asking a trustee to resign, because most corporate trustees will not want to remain in a relationship that might become difficult to manage.

There are, however, exceptions to this simple scenario. “I’ve seen a few cases where, because of the amount of assets under management in a given trust, trustees are reluctant to give up their post,” says Shiller. “Usually, these conflicts end up in court.”

Going to court is, unfortunately, the other well-known option for taking control of trusts. This tactic is commonly reserved as a last resort, however, because it can cast family trust quarrels into the public eye—and it offers no guarantee of a satisfactory outcome. A beneficiary simply telling a judge he does not like the trustee is usually insufficient to convince a judge to change the provisions of a trust. “Courts are often reluctant to call a professional trustee on the carpet or to get in the middle of a family squabble,” Shiller says. Beneficiaries are forced to make a substantive complaint against the trustee, such as showing that a trustee failed to abide by the terms of the trust, played favorites with certain beneficiaries or committed outright malfeasance. A beneficiary might be able to claim that a trustee made poor investment decisions, but that requires proving that he made inappropriate investments, not just lousy returns in a down market.

Ten states—California, Illinois and New Hampshire among them—allow beneficiaries to remove trustees for more nebulous reasons, such as a lack of cooperation that substantially impairs the administration of the trust or persistent failure to effectively administer the trust. But even under the most favorable laws and provisions, firing a trustee carries with it a fair amount of bureaucracy and costs. “Every time a trustee leaves a relationship, the trustee is entitled to have an audit,” notes Fiduciary Trust’s Cohen. “You’re trying to cut off any lawsuits.” Transferring the paperwork will take four to eight weeks—not counting any delays due to litigation. The total cost—which generally is paid by the trust—can range from a few thousand dollars to $10,000 and up if the parties go to court. Some trustees may also insist on a termination fee, which might come to 1 percent of the assets in trust.

Common Ground
To avoid copious amounts of emotional and financial distress, many trust specialists seek alternatives short of firing. Institutional trusts typically offer beneficiaries the choice of replacing a specific trust officer with a like trustee in the same organization. This option helps beneficiaries achieve their aims, while avoiding the cost and complexity of changing banks. “These institutions are not filled with robots,” Shiller says. “Their employees are people with personalities and predispositions, and you can usually find [a trust officer] who meets your needs.”

Short of court, beneficiary and trustee often force themselves to collaborate to solve complicated issues and resolve disputes before they are splashed across the pages of the tabloids. According to Shiller, trustees must often struggle with conflicting family priorities, such as the pressure to deliver maximum returns to current beneficiaries through higher-risk investments, weighed against preserving the trust’s assets for future generations. “In situations like this, a trustee will probably say, ‘I have to balance this,’ which will make current beneficiaries unhappy.”

Shiller notes that mediation and arbitration are becoming increasingly common in situations in which beneficiaries and trustees cannot see eye to eye, yet, for practical or legal reasons, do not wish to sever their business relationship altogether. “Pushing disputes onto somebody else and agreeing to live by the decision is often the best way,” he notes.

Fran Hawthorne is an author and journalist based in New York. franhawthorne@yahoo.com

Illustration by Ken Orvidas