Keys to Successful Trust Administration, Part 1 of 3

Keys to Successful Trust Administration, Part 1 of 3

What is Successful Administration? and Legal Considerations
Article posted in Values-Based on 17 September 2015| comments
audience: National Publication, Daniel P Felix - The Professional Trustee | last updated: 17 September 2015


Contributing author Dan Felix begins a new three part series on successful trust administration. Part I sets the stage by reviewing the various components that contribute to the successful operation of a trust.

By Daniel P. Felix, JD – © all rights reserved 2015

You would think that anyone who participates in a trust would want the trust handled successfully.

You would think that it wouldn’t matter whether you’re

  • the trust creator who is setting up the trust, or
  • the beneficiary, receiving  the  benefits  from  the  trust  creator,  or
  • the trust  and  estate  attorney  designing  the  trust,  or
  • the trustee  administering  the  trust,  or
  • one of the many important trusted professionals supporting the trust or the family.

We all want the trust to be successful.

Would anyone even admit to wanting an UNsuccessful administration?

But what makes the administration of a trust successful? How do we define a successful trust? And who gets to participate in that definition?

Is success simply accomplishing the transfer of the trust’s assets from the grantor to the beneficiary? Or could success also be helping the family to appreciate that gift?

Is success simply avoiding legal claims and lawsuits? Or could success also be helping the family thrive more harmoniously?

Is success honoring the freedom of the grantor to decide how he wants to use his assets? Or could success also be to help the beneficiary to use the trust assets to enhance his freedom?

Though every trust and family is different, perhaps we can do better in defining our goals by considering some known issues, inescapable components of trusts and trust administration that can make -­‐ or break -­‐ the trust.

Legal Considerations:

The trust laws impose boundaries on acceptable administration to prevent abuse and otherwise establish minimum standards. These are important protections for the various trust participants. Their necessity is underlined by continued exposures of their violation by unprepared trustees and attorneys -­‐ and far too often by unprepared attorneys acting as trustee! These ongoing violations support a dedicated plaintiffs’ fiduciary bar.

As essential as these legal minimum standards are, however, they should not be confused with best practices or success. In fact, as the articulation of the minimum standards, the law is not the best practice by definition.

And so, it shouldn’t be surprising that too often the trustee damages the family by administrating from the minimum standard that the law requires as opposed to what the family needs. In other words, trust administration that abides perfectly by the letter of the law may still be abhorrent or even destructive to the family.

In addition to paying attention to the legal minimums, a successful trust often takes into consideration:

  • The Foundation In Family Dynamics.
  • On-Boarding The Trustee: Starting The Relationship.
  • The Investment & Distribution Policy Statements: Setting The Course For Administration.
  • Trust Accountings: Financial And Other Communications.
  • Avoiding Disputes During Administration -- Or HOW To Communicate And Build Relationships.
  • Leveraging Legacy.
  • Philanthropy: Attending To Others.
  • When All Else Fails: Mediation & Resignation.

I'll address these elements in future posts.

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