“Breaking Up Is Hard To Do” …

… is the title of this great article in yesterday’s NYT. Dissatisfaction with trustees — particularly corporate trustees rather than individuals — has been growing over the last five years[…].

Most complaints center on investment performance, mostly because beneficiaries have become more financially sophisticated and more types of investments are now available.

So what to do about Trustees and beneficiaries that can’t get along with each other? The article discusses different options from multiple perspectives:

Newer trusts often spell out procedures for firing a trustee. A growing trend is to designate a so-called trust protector — typically, an accountant, a lawyer or a relative — [at BDB we call this a Trust Advisor] with the power to fire a trustee or change the investment manager. But Melvyn H. Bergstein, a partner at the law firm Walder, Hayden & Brogan in Roseland, N.J., said that even if there were provisions for firing, “friction or hostility between a beneficiary and the trustee alone is not enough to warrant removal. It takes essentially misconduct.”

Experts disagree on how difficult it is to win a trustee-dumping case. Mr. Dardaman said that evidence like a log showing a long spate of unreturned phone calls or proof of poor investment returns could convince a judge. But Mr. Kahn said such complaints were not enough. “You have to do something egregious before the court will fire you as a trustee,” he said, like putting trust assets into an investment where the trustee has a personal interest. “The court may simply say you owe some money back to the trust.”

The situation gets very sticky if the beneficiaries disagree among themselves. Trust documents usually require majority or unanimous consent among the beneficiaries to fire a trustee.

Poor service — including high turnover among trust officials and phone calls that are not returned — is another common complaint. “The longer a trust lasts, the more you’re going to have a change in trustee personnel,” said Richard Kahn, a partner in the law firm Day Pitney in Florham Park, N.J., who specializes in trusts and estate planning.

Read the rest of the article here.

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