A recent Wall Street Journal article shed light on the trustee/beneficiary relationship and how, by nature, the two often have competing interests. To be certain, not all trustee/beneficiary relationships are strained and careful estate planning can prevent many problems from ever arising. Nevertheless, even the most meticulously drafted trust instrument cannot anticipate every possible problem. Today, for trust beneficiaries we offer a few ideas culled from the Journal article and a few of our own to improve relationships with trustees in the face of possible disagreements.

If you are a beneficiary, read the trust instrument. The terms of the trust instrument almost always set the boundaries for both trustees and beneficiaries. Trust instruments tend to be complicated legal documents so if you need help interpreting the instrument, consider seeking the assistance of an estate planning attorney who drafts trusts routinely.

Trusts often grant trustees discretion to make or withhold distributions. How much discretion a trustee is permitted varies widely depending on the trust. Even if the trust of which you are a beneficiary grants the trustee little discretion, try not to let anger overcome you when you disagree with a trustee’s decision. Trustees generally respond more favorably when a beneficiary can make a calm and logical argument. Again, estate planning attorneys are accustomed to making these types of arguments so it might help to have this sort of experience on your side.

Fees are a frequent source of tension between beneficiaries and trustees. Trustees in Illinois are entitled to reasonable fees for their services. Although it may be difficult to pin down precisely what is and what is not “reasonable,” trustees tend to consider many factors when determining fees. For example, large financial institutions often charge more for their services than smaller institutions or individuals but the services they provide may be important. It depends on the trust. In some other states fees are subject to a schedule determined by statute and may not exceed the schedule. Many trusts name a trustee who is a relative or a family friend who might serve as trustee free of charge.

If the trust instrument empowers a beneficiary to change the trustee (many do), consider a number of factors carefully before making the change. How much expertise does it take to manage the trust in question properly? Does the trust require a financial wizard or will it suffice to have a friend who just happens to be financially competent? How important is it to have a personal connection (e.g. a relative or a family friend) to the trustee? Because the type of service a trustee offers is usually related to the fee the trustee charges, think about what you, as the beneficiary, consider the ideal balance.

Some trusts make no provision for changing the trustee. Seeking the assistance of an estate planning attorney can be helpful if the beneficiary considers changing the trustee important. At Schmidt & Lerner, for instance, we have had many an occasion to try and remove trustees when the trust instrument did not empower our clients (beneficiaries) to demand it. Logical, polite persuasion has worked for us but no single strategy can be guaranteed to succeed. Our point here is simply that estate planning attorneys often have experience devising strategies and arguments to which both individual and corporate trustees may respond favorably. As a beneficiary, before you insist your trustee resign, consider retaining competent, experienced counsel and your efforts may encounter fewer obstacles.

Finally, how a trustee invests assets is another common source of disagreement. Sometimes the trustee has the discretion to exercise total control and falls into an investment pattern the trustee finds comfortable. It may be productive for the beneficiary to meet with the trustee as a reminder that the trustee’s preferred strategy might not be a good match for the needs of the trust or the beneficiary. Again, a calm, polite, and logical approach tends to be more persuasive than an angry tirade that could make the trustee feel defensive.