Family Wealth by James E. Hughes Jr

Author:James E. Hughes, Jr.
Language: eng
Format: epub
Publisher: Wiley
Published: 2010-05-19T04:00:00+00:00

Chapter Notes

1 I am not suggesting that trustees aren’t part of the problem, because they are, and in the next chapter of this book I’ll discuss their roles and responsibilities in family governance.

2 I am indebted to Richard Bakal, who assisted me in the development of these criteria.

Chapter Eleven

Trustees

This chapter is dedicated to Richard Bakal, the deepest student of the relationship between beneficiaries and trustees I know.

TWO COMPLEX RELATIONSHIPS are formed between a beneficiary and a trustee when a trust is created. First is the legal relationship, and the resulting individual and joint responsibilities created by that relationship. Second is the behavioral dynamic between a beneficiary who is fully educated on what it means to be a beneficiary, and a trustee who understands that his or her role is to be the beneficiary’s representative.

In Chapter 10, I related the many times a beneficiary has entered my office wanting to get rid of a trustee. In this chapter, it is my goal to help trustees understand how to excel at what they do so that no beneficiary will ever come into my office, or anyone else’s, asking for their removal. I must pause here to apologize to the trust litigation bar for “taking the bread out of their mouths.”

I have a second goal far more important to successful family governance: that the relationship between the beneficiary and the trustee be so smooth that each sees himself as an equal member of a team working for a common goal of long-term family wealth preservation. To achieve this goal, the trustee must clearly understand who the beneficiary is as an individual and must want to promote her or his pursuit of happiness. The beneficiary, equally, must fully appreciate the legal realities under which the trustee operates; especially the general constraints imposed by the law governing the trust and the specific constraints imposed by the trust agreement. When a beneficiary and a trustee fully appreciate each other’s roles and responsibilities in the governance of the trust, their understanding advances the family’s long-term wealth preservation plan by making joint governance of the trust a positive experience for both parties. Their successful relationship proves to each of them, and by example to other family members, the utility of “control without ownership,” as discussed in Chapter 9, to the achievement and successful practice of long-term family wealth preservation. The problem is that all too often in the beneficiary’s eyes, the control and ownership have both resided with the trustee. Now is the time to change this dynamic by educating both parties on their roles and responsibilities in this complex relationship and then practicing the lessons learned.

Even when these roles and responsibilities are understood and accepted by both parties, they are only the structure for the relationship the parties will share. Rarely do the trustee and beneficiary understand that the human relationship they are beginning will be far more important to the trust’s success than the proper maintenance of their legal relationship.

Human beings believe that if they are

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