Dealing with the Core Trust Duality

Honoring the wishes of the trust creator while simultaneously empowering the beneficiary.(i)

By Daniel P. Felix, JD(ii– © all rights reserved 2015 – 2019

This article explores approaches for successful trust administration around the core duality in the trustscape of honoring the wishes of the trust creator while simultaneously empowering the beneficiary.

 

Tom, the trustee, felt challenged in handling the distribution request from Betty, the beneficiary. While the trust allowed his discretion in supporting Betty’s formal education, Betty’s request was for funds so she could participate in classes as well as informal gatherings to develop her “heart-felt intuition”. Tom knew that Betty’s father, Calvin, in creating this trust would have never allowed for her pursuit of a subject so far from the straight and narrow, so he felt the conflict between what Betty wanted to receive and what Calvin intended to give in the trust. What should Tom do? What should he decide and how should he decide it?

 

For trustees duality is nothing new. In fact, various authorities in the trustscape(iii) have long acknowledged the trustee’s need to manage seemingly opposing forces. The apparent conflict between honoring the wishes of the trust creator on the one hand, and in empowering the beneficiary on the other, is but one example of many of such dualities — or, more precisely, interdependent pairs — for the trustee.

 

What makes this pair of trust components interdependent is that each component of the pair is essential to successful trust administration, and simultaneously, neither is sufficient on its own. In other words, trust administration that addresses only the needs of the beneficiaries may well dishonor or even violate the wishes of the trust maker set out in the trust documents.

 

On the other hand, ignoring the impact of the trust on the beneficiaries is a key source of friction and litigation – and why some 80% of trust beneficiaries consider their trusts to be a burden(iv). In fact, the blind application of the trust creator’s document to the destruction of the beneficiary exalts form over substance and in so doing, dishonors the trust creator’s typical (if too often merely implicit) intention to bless the beneficiaries(v).

 

It’s no wonder that the trustee’s job has been likened to the Roman god Janus – whose two faces could gaze on opposite perspectives simultaneously.(vi)

The trustee typically encounters a roster of other interdependent pairs. Consider just this short list:

1) Stewarding assets for both present AND future needs.

2) Engaging in communications which embody both Discretion/Security AND Transparency.

3) Trustee Loyalty: to each individual beneficiary AND to the whole system.

4) Trustee Loyalty: to himself AND to the beneficiaries.

 

The challenge for the trustee is over “how”. How does he engage both seemingly contradictory aims simultaneously?

One approach is to choose one component over the other. And, we know some trustees administer in this way. We hear of trusts which are administered to the detriment of the beneficiaries, and on the other hand, we also hear of trusts which are administered to acquiesce to the whims of the beneficiary.

 

Following either extreme often leads to one type of failure or another. So, in our example, if Tom simply decides that the trust language is the trust language, the likely result is alienating Betty, the person who he’s supposed to care for and protect. Worse, Betty may lose her motivation to pursue her passion and instead channel her energy to seek redress in court. On the other hand, if Tom simply throws up his hands and says, “whatever you want, Betty,” he has violated the trust that Calvin put in him, and the law as well.

 

Good trust administration provides some recognition to the needs of the beneficiary. Perhaps we can agree that good trust administration remains at least mindful of the impact on the beneficiaries. Think of the trustee as the captain of a ship with the trust document as his directions. In the act of navigating, the captain must necessarily also consider the impact of the ship’s wake as well as the health and safety of his crew. We would not have much respect for a captain who capsized other ships or abused his crew, even if he’s successful in bringing the ship to the appointed harbor. One expert has well identified this known negative problem as “The Trustee who Mistook his Checklist for Wisdom.”(vii

 

I suggest that while a good trustee is merely mindful of the duality, the trustee in pursuit of mastery administers the trust with an express approach to dynamically balance the interdependent pairs he will inevitably encounter.

 

Part of this best practice is to employ Practical Wisdom. More than the meaning of its descriptive words, the art of Practical Wisdom is the appreciation that all of us need to select from competing values in order to successfully navigate the complexity of the world around us. This helpful idea goes back to Aristotle and is the basis for an informative eponymous book(viii).

 

Various experts have rightly suggested the application of Practical Wisdom to the trustscape. Consider one example of Practical Wisdom which resonates with trust administration: the scenario of a baby-sitter who references the parents’ note clipped to the family refrigerator. That baby-sitter is supposed to follow the parents’ directions for the baby’s schedule. And she is also expected to be mindful of the immediate needs of the baby.

 

So, consider one of the myriad of factual permutations: what if the baby is not yet interested in her 5 o’clock bottle as her designated 6pm bedtime approaches? Should the sitter put the baby to bed at the directed time without the bottle, or should the bottle and bed be delayed until whenever the baby is ready? The baby sitter has to apply Practical Wisdom to resolve the dilemma of which value – adherence to the appointed schedule or deference to the needs of the baby – she should follow.

 

A trustee, like the baby sitter in the example, may be able to reach out to others for further guidance. Yet, for the trustee in pursuit of mastery, the key question is what methodology illuminates the selection of the value to be pursued. Practical Wisdom does not offer an express methodology to determine how to select between competing values. In fact, the implicit approach from the book is that only by engaging in a conscientious and aware practice over the years will the practitioner eventually develop proficiency at Practical Wisdom.

 

And perhaps by dint of experience, many trustees have developed successful approaches for dealing with the interdependent pairs inherent in trust administration. By definition, however, these approaches are idiosyncratic and based on a subjective and often unconscious competence.

 

While experience remains an important teacher, an express methodology can be an important tool and more efficient teacher. Here is one express methodology for balancing, if not positively leveraging interdependent pairs(ix).

 

This approach consists of articulating specific sets of information regarding each of the components of the interdependent pair. Specifically, this information includes the results which are hoped for as well as the results which are feared for each component of the pair. In addition, the trustee is called to identify for each component, both concrete action steps which will reasonably lead to the positive results, and also the warnings signs of the feared result to better avoid it.

 

To illustrate, let’s apply this methodology to the interdependent pair at issue. So, Tom might list the positive results of honoring Calvin’s wishes as follows:

• Honoring Calvin’s directions and fulfilling his higher purpose of valuing education. This is a positive result in itself: administering towards what Calvin requested.

• Modeling a best family practice of giving to beneficiaries in support of their education. Funding education is a critical value which is important to ritualize into the lives of family, as is the funding in support of values generally.

• Complying with the law which requires a trust maker’s instructions duly manifested in the trust to be followed. Acting within the law is generally a good thing, and acting outside of it can have serious consequences.

 

Next, Tom’s list of possible action steps to implement an administration to produce those positive results could include:

• Articulating the trust purpose, mission and/or vision. Expressly affirming Calvin’s support of education as a keystone of the administration is important.

• Articulating a stewardship policy – for both distributions and investments. How the trust handles it’s money is the physical manifestation of the values that it supports.

• Employing an appropriate communication system with Betty to share these with her. It’s the trustee’s job to explain what he is doing and why.

 

Can we acknowledge that each of these three actions steps constitutes a best practice? Regardless, a trustee doesn’t need this methodology to know to use them. At the same time, this methodology proves that these steps are practical necessities and not just fluffy idealism. Also, applying the methodology to other situations and other trustscape dualities may suggest different actions steps. In fact, the application of the methodology – and the actions steps — to a specific situation over time may well suggest a deeper level of detail and refinement.

 

Further and perhaps most compellingly, these actions steps will be informed by the other parts of the process, as will be seen here.

 

In addition to the positive results to be achieved, the methodology also has Tom articulate the feared negative possibilities of focusing on Calvin’s wishes to the exclusion of the consideration of the Betty’s. He may list these as:

• Holding Betty hostage to the dictates of her dead father.

• Eviscerating Betty’s self-worth from having no control over the process. Likely Betty, and perhaps Calvin had he been asked, did not want the trust to stifle Betty’s development and damage her self worth.

• Funding disconnected with Betty’s real needs. The value of the trust is to connect to Betty’s real needs.

Next, Tom could assess the warning signs of these negative results as:

• Betty complaining and not fulfilled.

• Betty not able to benefit from the trust.

 

Note that by articulating the fears, the action steps can be better created. For one example, Tom can create the action steps to specifically address Betty’s fear of being held hostage by her dead father.

Further, depending on his relationship with Betty, Tom can include her in any or all parts of the methodology.

Having considered the various aspects of the Trust Creator component of this interdependent pair, the trustee can consider the other component, that of empowering the beneficiary(x).

 

So, the positive results of empowering Betty might include:

• Betty leading an empowered and enhanced life.

• Betty enjoying the gift of her father.

• Betty being grateful for the trust’s support of her career.

 

Tom’s possible action steps to implement an administration to produce those positive results could include:

• Articulating a supporting trust purpose, mission and/or vision. Of course, this is purpose, mission and vision which resonates with Betty!

• Articulating a stewardship policy – for both distributions and investments. Again, this is a stewardship policy which supports Betty.

• Employing an appropriate communication system with Betty to develop and share these with her, and within the context of Calvin’s version as embodied in the trust.

 

Note the happy synergy that these actions steps are identical to the action steps for creating the other interdependent component. Although the different components will necessarily inform these action steps differently, this identity gives the trustee greater efficiency. Specifically, he now can pursue the two sets of results with the same tasks. In practice, the two sets of actions steps may not be identical.

 

Next, Tom with Betty’s help may consider the possible negative results of focusing on Betty’s empowerment to the exclusion of the consideration of honoring Calvin:

• Violating Calvin’s directions for handling his estate and his higher purpose and vision.

• Squandering of assets.

• Eviscerating Betty’s self-worth from not having any limitation on her desires.

See how the potential downside of both components of this pair includes damage to Betty’s self worth, albeit from two different mechanisms! It’s no wonder that damaged self-worth, evidenced through substance abuse among other ways, is a known phenomenon among trust beneficiaries.

 

Tom and Betty could assess the warnings of these negative results to look like:

• Betty does not consider the money a gift.

• Betty does not buy-in to Calvin’s vision.

• Betty becomes unstable

A chart can be helpful to display the various data produced through this methodology. Such a chart could look something like this Polarity Map®(xi):

 

Trust Gift AND Receipt Polarity Map New

 

Such a chart on its own may satisfy compliance requirements for documenting the process of the trustee’s decision-making.

So, now back to Tom and Betty.

Tom understands that he’s dealing with an interdependent pair. In fact, he knows it is the core duality of the trustscape. This means there’s a process of considering the elements of the interdependent pair, and it’s not a simple decision, even in the possible, but unlikely event that the language of the trust leaves no room for discussion.

Empowered with his application of the methodology and having created a chart via a Polarity Map®, Tom can look at the whole of the system, and not just a part. He has to look to his responsibilities to empower and benefit Betty as well as his responsibilities to carry out the directions of Calvin, the trust creator.

He can use the Map to organize the many facts which we’re not privy to, such as among others, the language of the trust: whether Calvin expressly defined education to exclude her intuition classes, and to what extent Tom retains discretion or is able to rely on another distribution provision to fund Betty’s training.

Especially if his decision does not favor Betty, Tom may find it appropriate and helpful to walk Betty through the Map to demonstrate his analysis as well as to demonstrate the importance to him of benefitting her in other ways and perhaps even elicit her involvement and opinion. His active listening to and involving of Betty may mitigate any disappointment she may have and could preserve or even enhance her confidence and trust in Tom(xii).

Though individuals and situations will vary from trust to trust, the trustee who applies this methodology may better help his trust families deal with the inescapable dualities of the trustscape.

 

More on Typical Dualities in Trust Administration can be found in this article.

 

(i)

This is a condensed version of this author’s inquiries and considerations of paradox and dualities in the trustscape. One of those larger works is a chapter in his upcoming book, “The Way of the Trustee: A Guide to Enlightened Trust Administration in Service to Families”. The author gratefully acknowledges the generous and gracious support and help of Barry Johnson, founder and principal of Polarity Partnerships, LLC, and his colleagues, Susan Dupre and Cliff Kayser. See www.PolarityPartnerships.com. The author also gratefully acknowledges the editing help of collaborator, Neesa Sweet, Braided River Group, www.braidedrivergroup.com, Frank Gregorsky, ExactingEditor.com, and not the least, Hartley Goldstone, NavigatingTheTrustscape.com.

(ii)

Daniel P. Felix is an attorney who uses his legal skills as The Professional Trustee to help families navigate the rough waters of disability and death. Manifesting his personal mission to help create the tipping point for conscious intergenerational transitions, Dan’s unique offerings are the Family Trust Rescue Service™ and Successful Successions™. A trustee for over 20 years, Dan writes and speaks widely on this his passion and is the founder and president of the Chicago Trustee Collaboratory – ChicagoTrustee.org — a not-for-profit study group organized with the goal of helping families flourish in the trustscape. He is a part of the Purposeful Planning Institute learning community. He has studied Polarity Thinking for almost 15 years, including participation in various workshops and intensives.

(iii)

Hartley Goldstone invented the word “trustscape” as a short hand to reference the trust creator, the trust’s beneficiaries, the trustee and the systems and practices surrounding them. As such, the trustee acts in the trustscape.

(iv)

The statistic belongs to James (“Jay”) Hughes, who states that he has surveyed trust beneficiaries extensively on this point. jamesehughes.com

(v)

Of course, every trust creator may not always intend to bless the beneficiary. A trust creator may intend to punish the beneficiary in some way. The trustee then has the decision as to whether to participate in that punishment, including (but not limited to) whether to serve as trustee.

(vi)

This reference to the two-faced Roman god of doorways and endings, who looked both to the past and to the future in describing the trustee’s job appeared in the article “The Moral Core of Trusteeship,” by Hartley Goldstone, Rev. Scotty McLennan and Keith Whitaker. http://www.navigatingthetrustscape.com/index.php/publications/articles/the-moral-core-of-trusteeship

(vii)

Hartley Goldstone, http://wealthmanagement.com/estate-planning/trustee-who-mistook-his-checklist-wisdom

(viii)

Practical Wisdom: The Right Way to Do the Right Thing, by Barry Schwartz and Kenneth Sharpe

(ix)

The approach was developed by Barry Johnson along with both his organization, Polarity Partnerships, LLC. and the generative wisdom community he has fostered. Originally applied to inner conflicts the approach, called Polarity Thinking, has been adopted in various other spheres including organizational development, business consulting, among others.

(x)

Of course, there’s no set order in considering the up or down sides. Rather, the order will be suggested by the situation at hand.

(xi)

Polarity Maps® are the excellent creation of Johnson et al. Polarity Partnerships, LLC retains all rights. This use of the Polarity Maps® in this article has been expressly authorized.

(xii)

Or not.