A Helpline for Family or Friends as Trustees Balance Obligations Without Ceding Control

A Helpline for Family or Friends as Trustees Balance Obligations Without Ceding Control

Sound too good to be true? The Trust Hotel allows individual trustees to remain in the driver’s seat and gain a valuable trust administration partner

A trustee can be a devoted ally, friend, and family member. But if the relationship ruptures, the result can be devastating, both emotionally and financially. Are your clients protected? Is the appointed individual trustee ready for the legal responsibility and paperwork headaches? In many cases, the answer is unfortunately no.

The position of trustee carries a serious fiduciary obligation that can be time-consuming and frustrating, not to mention carry considerable financial and litigation risks. And that burden could be life-long. While some trusts are designed to last only a few years—such as in the case where minor children are involved—others can last decades.

Take the recent case involving the Buckley family that ended last year after a five-year court battle. Six of the 10 children of the sister of the late conservative columnist William F. Buckley sued their father in 2009, accusing him of theft, misappropriation and self-dealing.

The case revolved around the Hembt Trust, which Aloise Buckley Heath had set up for her children using some of her family’s oil, gas and mineral rights. The assets in the trust were derived interests Aloise’s father, William Buckley Sr., started accruing in Venezuela and the Caribbean in the 1920s. When he passed away in 1958, each of the surviving Buckley children got about 9.8 percent of the company, called Catawba Corp., formed to hold the assets.

When Aloise passed away in 1967, her Will named her husband Benjamin Heath as executor of her estate. The trouble arose when Heath’s children discovered their elderly father had transferred 54 percent of the Hembt Trust’s assets to a second, private trust called the Westmont Royalty Trust, that his children had no stake in. Instead, he and his second wife, Maria Heath, controlled the funds.

While the lawsuits declined to specify how much money might be involved, the few public records available show there was likely still millions of dollars at stake.

A Connecticut judge eventually ruled in favor of Mr. Heath in June 2012, but he passed away at the age of 98 just two months later. But that didn’t stop his children from appealing the decision, naming Maria Heath  as the main defendant.

Finally the Connecticut Appellate Court, the state's second-highest court, upheld the lower court’s decision in May 2014. The appeals court found there was nothing wrong in the distribution of trust funds.

And after all that, the attorney for Heath’s children said that the assets in the trust had "dwindled considerably.” But perhaps more devastating than the financial mismanagement and claims of self-dealing at issue in this case, was the complete breakdown of family ties—battle lines drawn, pitting child against parent.

Sadly, cases like this are not uncommon. Many times family members and friends of the family are thrust into the position of trustee without any experience and asked, in some cases, to carry out tedious and time-consuming procedures.

Managing the Commitment and Offering a Helpline

But there are solutions. One of the most approachable ways for a trustee to manage their responsibility is through agency trustee services, which allow individual trustees to balance their obligations without losing control. Wealth Advisors Trust Company (“WATC”) calls this service the Trust Hotel.  By partnering with a firm like WATC, an individual trustee gains someone standing behind them who will undertake all the tasks required by the trust.

Why engage these services? For the most part, the vast majority of people named as individual trustees cannot comply with all the requirements mandated by the trust document. And not necessarily because they’re being lazy, but because they may not realize the extent of what is required as written in the trust document and required by trust statute laws.

That may be fine while the relationship is working well, but when a trigger event occurs, such as beneficiaries seeking more funds or requesting an increase in the frequency of distributions, agency trustee services offer a solution on the backend work, as well as documentation and support that can potentially avoid the litigation by providing a clear picture of what’s happening at all times.

Wealth Advisors Trust Company offers this support through an agency concierge service called the "Trust Hotel,” which allows family members to bring their trusts in, check them in, have them supported by an expert trust company staff who can provide any on-demand trust administration that might be needed.

The service offers many mutual advantages. The creator of the trustee can still choose the trustee, with all the emotional and other benefits that entails. The trustee receives support in working through his or her fiduciary duties. The beneficiaries work with a familiar face, but also have a truly neutral trust admin­istrator behind the scenes to ensure all decisions are both fair and stay within the stated objectives of the trust.

Additionally, with WATC’s model, there is no need to change the location of the trust, the advisor or the custody of the assets.  That is very very unique. And firms like ours that offer these services don’t oversee the investments at all; we just work to administer the trust.

And we can be dismissed at any time, even fired in an email. But what we’ve found is the individual trustee is shocked by how easy it can be, and together, we build a beneficial, long-term relationship.

Yet despite all the services provided, the cost is actually cheaper than other alternatives. Depending on what kinds of assets are involved, it could be 20 to 30 percent cheaper. The trustee never pays outright. Instead, there are two methods of compensation for the services provided. If the trust owns a partnership that holds private stock, or things like oil, gas or real estate, Wealth Advisors Trust Company charges a hard dollar fee on those assets. If the trust holds marketable securities, we charge a percentage of the assets.  The combination of these two methods is also very unique and trust friendly.

The structure also provides a good solution for financial advisors overseeing the investments within the trust’s portfolio. The advisor charges their fee the same way they’ve always done and the assets stay with the current custodian. The majority of trust companies do not offer a custodian neutral agency trust service solution which WATC calls the Trust Hotel. Some larger trust companies charge the advisory fee and then pay the advisor, but we’ve found that it’s easier not to get in the middle.

These structures have been around forever, but traditional trust companies don’t like to talk about it because they think they lose control. Trusts tend to stagnate or decline in value the longer they’re around. The first day of administering a trust may be the best ever from a revenue standpoint. Traditional corporate trust companies tend to ignore that mathematical reality—it’s why they hold onto the money so hard. We accept that fact. Distributions are meant to happen all the time. But we try to maximize efficiency in the distribution, delivery and service process to ensure success.

At the end of the day, WATC’s Trust Hotel , a plug and play solution, ensures the individual trustee remains in a position of responsibility and control, but provides access to talented, sophisticated tools that do not disrupt the relationship. It’s about optimizing wealth , not changing, the relationship.

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