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| Visions & Revisions |
The Business of Trust Busting
Marianne Cotter
01/01/2004
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Law and accounting firms make good alternatives to banks for administering trusts.
Not so. While individual lawyers or accountants may be perfectly appropriate choices to act as individual trustees, using any kind of professional service firm as a trustee is a mistake. When a professional firm acts as a trustee, eventually the family is forced to deal with an institutional mindset that has, as its primary goal, the aim of perpetuating itself. One of the most honest attorneys I know shared with me this quote from one of his law professors: "Estate planning is the proper marshalling of assets in order to generate fees." When a firm is chosen without specific limitations on the terms of service, and when the right to remove it with or without cause is not present, a benefactor is setting the stage for future conflict.
One member of the firm may have or have had a special relationship with the benefactor. If no family member has proven experience in handling money on behalf of others, many grantors naturally seek the counsel of trusted professionals. As a result, people who are nominally responsible for hundreds of millions of dollars of old family money sit on their butts in skyscrapers. For them, it’s a better deal than selling insurance, because they collect substantial fees every year for doing very little.
These senior partners pass this lucrative business along to their younger associates when they retire, thereby enhancing the sales value of their professional partnership interests. When a law or accounting firm—or anyone, for that matter—has the right to name the successor trustee, without input from the family, it’s bad news for the beneficiaries.
If potential trustees have the same skill sets and access to the same financial information, they can be expected to
provide similar levels of service.
False. It’s impossible to know if someone is going to be a good trustee unless he or she has a proven record of providing personal service. This doesn’t mean you shouldn’t consider someone because he lacks prior experience. Many people who have no technical expertise make great trustees, while others who have a high degree of technical skill in investing, law or accounting end up being terrible fiduciaries because of their narrow scope. Trustees have to have the beneficiaries’ best interests at heart and be willing to ask for help.
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