Probate & Trust Law Section Conference Manual ... - Minnesota CLE

didn’t occur) a long time ago? 1 Can the trustee-beneficiary say no to a distribution requested by
certain other family members (assuming denying the distribution is the proper decision)? Will a
trustee-beneficiary risk alienating one family member or family group by denying a distribution, if
the trustee-beneficiary desires to retain their favor for other business or personal reasons? Or will the
trustee-beneficiary want to ingratiate himself to another by being liberal in his policy of making
distributions? Can the trustee and the other beneficiaries maintain a clear mental and emotional
distinction between the legal role assumed by a fiduciary and the family role played by a father or
mother, brother or sister? A trustee who is also a family member and beneficiary may be forced by
conscience or by duty to make choices injurious to both his own rational self-interest and to longterm
family harmony.
Theoretically, an independent professional trustee is not subject to such conflicts. One of the
responsibilities of a trustee is to be able to say no to a distributions request that is not in accordance
with the settlor’s intention. If a professional fiduciary is capable of exercising greater impartiality
and objectivity, then clients should be encouraged to consider that fiduciary as a viable alternative.
One caveat, however, is that for many years, professional fiduciaries gave less attention to the
fiduciary nature of their “client relationships” and more to providing the same kind of personal
service that was standard practice in top professional service firms, all encouraged by a “sales” focus
driven by upper management as the sure road to Wall Street favor. Coupled with the prospect of
increased turnover, fueled by the accelerating use of trustee removal and replacement provisions,
either by statutory authority or by express provision in a trust instrument, this shift in focus caused
professional fiduciaries to treat trust beneficiaries as “clients,” for whom nothing was out of the
question, at least during the sales process. More accommodating trust companies replaced
professional trustees who did not toe the line. Salespeople (called “business development officers”
or “financial advisors” in a laughably transparent attempt to fool the marketplace) were paid large
bonuses relative to those paid to those who were charged to fulfill on the impossible promises made
to bring business in the door.
In response to market demands for increased fiduciary independence, a number of smaller, more
boutique trust companies are being formed for the purpose of filling the gap. As a result, the large
financial institutions are slowly coming around to refocusing on the long-term nature of their
fiduciary responsibilities.
In spite of this, we believe that there exist a large number of trust administration professionals who
have consistently held to their values, in spite of financial incentives to the contrary, and provide
value to families that far outweighs the fees they charge. Client perception of the fees charged by
professional fiduciaries is often the primary driver of a decision to use family members or friends as
trustees rather than a professional fiduciary. There are certainly many situations in which it is
appropriate to use certain individuals as trustees; however, the clients should consider the risks and
burdens they are placing on those individuals and whether those individuals can truly act
independently, as well as the overall, long-term effects on family relationships, as having higher
priority than a fiduciary’s fee schedule. In many cases, the fees charged by professional fiduciaries
1 “Mom always liked you best.” Tommy Smothers to brother, Dickie Smothers. For those who do not remember (or
were alive during) the 60’s and 70’s, the Smothers Brothers were one of the most popular and enduring comedy
teams in history and built their act built around the tensions of sibling rivalry; they combined irreverent musical
humor with subtle political satire, poking fun at institutions ranging from motherhood to the government and
organized religion. They attracted a large devoted following from the burgeoning youth culture and drew
considerable ire from more conservative quarters.
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