The One Question All Trustees Should Ask Themselves

#Lifestyle Wealth
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Have you ever seen the show The World’s Most Extraordinary Homes? My favorite segment in each episode occurs when the hosts interview the architects. The architect will describe the origin of his creative vision for the home, how the shapes and colors used in the home might be symbolic of the thing that inspired that vision and how the materials were sourced and brought to the land on which the home was built.

All of these factors coalesce to inform how the home will be lived in. The architects will discuss the care they took in designing the home so that the inhabitants enjoy their time inside it. Can we position this window to capture the sunset? How can this garden nook invite the inhabitant to read a book? Can we design the kitchen so that it invites dinner guests to enjoy each other’s company? What it really boils down to is creating a space in which the homeowner can live well.

What’s clear in these episodes is that a good architect ensures that a home is built on a solid foundation and that it will be a fundamentally safe and reliable place to live. But a great architect, in addition to his basic duties, also wishes to enhance the wellbeing of the homeowner. There are myriad examples in other professions in which we could say the same. In my line of work, one pertinent example can be found in the role of a trustee.

The Difference Between a Good and Great Trustee

What distinguishes a trustee who’s merely “doing her job” from a trustee who has greater meaning in mind? To be clear, performing the basic duties of trusteeship is no small task. There are many administrative requirements that must be met over the course of the year to properly perform the role. Making required distributions to beneficiaries, ensuring the trust funds are properly invested, overseeing tax payments and complying with accounting requirements are just a few examples.

Throughout my career, I’ve had the opportunity to witness exceptional trustees, who, like exceptional architects, go beyond just tending to the basic requirements of the job. These are the trustees who intentionally build relationships with beneficiaries. I’ve never worked with a grantor who took the decision of trusteeship lightly. Typically, the grantor is a mother or father creating a trust for their children and grandchildren. And all of them have asked the same question when deciding who should fulfill the role of trustee: who is best positioned to take care of my family after I’m gone?

I would go a step further and posit that exceptional trustees aren’t just taking good care of the trust’s beneficiaries. They’re also focused on improving the lives of those beneficiaries. They want to ensure not just that the trust funds will be available to meet the basic needs of the beneficiaries but also that the funds can be used in a way that will enhance their mental, physical and emotional health. Put another way, they want to use the trust funds to ensure that the beneficiaries’ well-being is always taken into account. Fundamentally, these trustees are asking themselves: how can this trust be used to improve the beneficiary’s life?

Buy Experiences, Not Just Things

To address this crucial question, answers can be found both in the trustees’ knowledge of the family and their lived experience as advisors and mentors and from the principles of behavioral economics. It’s well-established that spending money on experiences rather than material possessions tends to result in more lasting happiness. (See, e.g., James Hamblin, “Buy Experiences, Not Things”)

Over the years, I’ve seen that some trustees understand this concept intuitively. For example, if the trust’s language is fully discretionary and a beneficiary’s basic needs are otherwise being met, an exceptional trustee may ask herself: “what else can I do to ensure that the beneficiary’s life will be enhanced vis-à-vis a trust distribution?” The answer often lies in the purchase of experiences.

Not long ago, I witnessed a conversation between a colleague and his client, who were together acting as co-trustees of a trust for the client’s daughter. The client wanted to ensure that the trust funds were being used appropriately for her daughter but was not sure how this could be done. The mother believed that her daughter already had all of the material possessions she might need and was concerned that if she received more trust funds, she might not use those funds wisely. Her co-trustee responded with a simple yet revelatory suggestion: they should make distributions to pay for a regular babysitter so that the client’s daughter and her spouse could get out more together (a desire the daughter continuously expressed).

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The above example, of course, portrays a run-of-the-mill, straightforward and perhaps obvious solution. Each situation is unique, each beneficiary is unique and each trustee must approach her responsibility with care and compassion, building on her own professional and personal experience and her knowledge of the beneficiary’s specific needs and desires.

Improve Beneficiaries’ Wellbeing

Serving as a trustee is an undertaking that requires not only adherence to administrative requirements and commitments but also one that’s greatly enhanced by depth of knowledge, intuition and concern for the wellbeing of trust beneficiaries. Your clients should therefore entrust this responsibility to someone who recognizes the true value of things and takes the time to get to know them and their families.

https://www.wealthmanagement.com/estate-planning/one-question-all-trustees-should-ask-themselves

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