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KeithWhitaker

Many years ago a member of my family asked me to serve as a trustee for a personal trust she had established. I agreed without much thought. It felt like a pro forma sort of thing: a document needed signing, and I was willing to sign it.

I had a lot to learn.

In the years since, I have served, paid and unpaid, as a trustee of many personal and charitable trusts as well as a director of or adviser to foundation boards, business boards, and private trust companies, for my family and for others. I have seen the great good that trusts can do, and the great harm. I have had the pleasure of working with generous grantors and grateful beneficiaries. I have had the displeasure of dealing with lawsuits over trusts that have torn apart families and friendships.

Along the way I have learned a great deal from other trustees, beneficiaries, and numerous advisers. One thing I learned is that my initial experience was not unusual. Few people begin service as a trustee with much clarity about what it entails. Most trustees begin as I did, wishing to do a favor for a family member or friend, unaware of the complexities and the opportunities that trusteeship brings with it.

For such trustees, the standard handbooks in the field —Loring & Rounds or The Third Restatement of Trusts– are amazingly rich but often too specialized. Coursework, such as that offered through the American Bankers Association, can help. But there has been no truly practical resource for the great majority of individual trustees.

Hartley, Jay, and I wrote this book to benefit any member of the “trustscape” (as explained in Part One) who finds him- or herself in a situation similar to mine those many years ago. You, our readers, are trustees, would-be trustees, beneficiaries, trust creators, or advisers who are conscientious and want to do the right thing. You may or may not have legal or investment expertise, but even if you do, you realize that your expertise may not completely prepare you for living with a trust. Most importantly, you recognize that your goal is to deal with that trust not only correctly (that is, in compliance with law and regulation) but above all well, namely, for the true good of all the people affected by it.

In writing this introduction and serving as a trustee, I have been guided by the belief that trusteeship is far more than a matter of administration. Even if unpaid, it is a noble profession. It is similar in this way to the noble professions of medicine, law, teaching, and the clergy. This means that even if a trustee performs his or her duties only a few hours a week or month, still, in those few hours, he or she is serving in a tradition that stretches back centuries and that has an inner worth of its own.

Principles

The rest of this introduction will say a few words about the principles that underlie the noble profession of trusteeship; it is meant to inform trustees, beneficiaries, and trust creators. It will also connect these principles and thoughts to the chapters and sections of the book that follows. In the main body of the book, Hartley, Jay, and I will outline practices and activities by which members of the “trustscape” can put these principles to work. If you would like to skip right to the practices, please feel free to jump to Chapter 1. If you would like to have a better understanding of our principles, then read on.

The five principles discussed here do not replace the traditional duties of the trustee, such as prudence, care, impartiality, and so on. Instead, what I have sought to do is to uncover some of the aspects of what we have elsewhere called the “fiduciary character” that makes any individual trustee the type of person who will fulfill these duties.2 What trusteeship looks like will vary from time to time, place to place, and situation to situation. What makes up its core persists over time, place, and situation to give shape to the work amid changing circumstances.

1. First, Do No Harm

This is the first principle of every noble profession. Doctors swear it in the Hippocratic Oath. Lawyers, teachers, and the clergy have their own versions, spoken or unspoken.

This principle reminds us that trusts and trustees can do harm. Trustees have an intimate relationship with the other parties to a trust. We see confidential financial statements. Depending on the circumstances, we may be privy to confidential personal information regarding health, drug use, or other private behavior. Not honoring this “trust behind the trust” smashes the relationship to bits.

Sometimes doing harm takes on more subtle forms than exposing confidential information. Many trustees find themselves beset with “trust fund babies,” that is, beneficiaries who live without work or purpose, dependent on their distributions. Is money the problem, “the root of all evil”? Or is family dysfunction the cause? Both may have a part to play. But the most common sort of trusteeship – tight-lipped, communicating only the bare necessities, winnowing down our relationship with beneficiaries to an annual letter along with the distribution checks – may also be a cause. The flip side of paternalism is infantilization. If we treat adults like children, it should be no surprise that we produce childish adults.

Not doing harm requires constant vigilance. That is why throughout this book, especially in Part Three, we emphasize practical ways that trustees and beneficiaries can develop strong relationships aimed at beneficiaries' growth.

After all, trusts and trustees can also do much good. The decisive difference lies in intention. Doing no harm is the first expression of what the Buddha called “right understanding,” the understanding or view that sees the whole, accepts the whole, and then seeks to ease suffering.

Part of this right understanding is recognizing one's own boundaries. It is tempting, when one has been entrusted with perhaps millions of dollars, to believe that one can do it all. As the old Yiddish saying quips, “When you have money in your pocket, you're smart, you're handsome – and you sing well, too.” In contrast, wise trustees do not fall prey to that temptation. They spend time and money to get the best advice that they can, whether around investments, law, taxes, communication, or human relations.

As Hartley and Jay have said, most trusts are proposed as expert solutions to the problem of minimizing gift, estate, or income taxes. In other words, most trusts aim at a quantitative goal. But if the trust exists for any period of time – and particularly if it does succeed at its quantitative goal – it will have an immense qualitative effect on the lives of the grantor and beneficiaries. This qualitative side of the trust is almost never discussed at its inception and often receives little attention during the trust's life.

As a result, it often falls to the enlightened trustee or adviser to be aware of and to foster the qualitative aspects in a positive direction. To do this work, it can help to begin by recognizing that the true capital placed in trust includes the human, social, and intellectual – as well as financial – capitals embedded in the trust relationship. This recognition then leads to asking, “Will this distribution help the beneficiary add to his or her growth or experience in life, his or her human capital? Will it help the beneficiary connect with others in a meaningful way, thereby increasing his or her social capital? Will it add to the beneficiary's knowledge or skills, his or her intellectual capital?” This orientation to human capital is what we hope to achieve in Part One of this book. We then take that orientation squarely into the distributive function of trusts in Part Four.

2. Fidelity

Trustworthiness is more than not doing harm. It rests on solidity of character, on standing by your word, on “ringing true” when tested. That is fidelity, the core virtue of a trustee.

Although a servant may be faithful, fidelity is not servitude. An agent serves. But a trustee is a principal, not an agent. If you have asked someone to serve as trustee merely to do your bidding, then you are not really looking for a trustee; you are looking for an agent. The same goes if you are a beneficiary who thinks that your wish should be the trustee's command.

Trustees owe their fidelity not only to the trust creator or to the beneficiary or to themselves but to the trust – that is, the trust relationship. This is a crucial point. Sometimes trustees will say that they owe their fidelity to the trust document: “I will do only what's permitted within the four corners of the document.” The document is no doubt of great importance. But it is of importance because it has an impact on the lives of people.

Fidelity is not an easy path. Often, the more comfortable route is to become the agent of the trust creator or a beneficiary. Fidelity means recognizing and resisting these temptations. One way that I think of fidelity is that my role, as trustee, is not just to speak for the trust creator or just to listen to the beneficiary (though both of those activities are very important) but, above all, to keep alive the spirit of the gift. I owe my fidelity to the gift and the relationships it creates rather than only to the giver or only to the recipient.

What I mean by “the spirit of the gift” is a topic that goes beyond the confines of this introduction. My co-authors and I discuss it much more fully in our Cycle of the Gift: Family Wealth and Wisdom (New York: Bloomberg, 2013). Put simply, every true gift contains much more than the material “stuff” that is transferred. It contains spirit. Sometimes that spirit expresses expectations around work or education; sometimes it has to do with a vision of entrepreneurship; sometimes it concerns family life and relationships. The spirit of the gift may be expressed, in words or in writings, or it may be unspoken but felt. In any case, it holds great power for the giver and the recipient. As the Roman philosopher Seneca wrote 2,000 years ago, “As a gift is given, so shall it be received.” If there is no spirit in a gift, then we call it a “transfer,” and in such cases it is not surprising if the recipient finds the gift to be a lifeless or even life-draining force. Most of the gifts that lead to the “horror stories” told about “trust fund babies” are not gifts with spirit; they are transfers.

A trustee's fidelity expresses itself in its highest form in identifying, fostering, and keeping alive the spirit of the gift. There are various ways of doing so. It may mean helping the trust creator write down or record his or her wishes for the trust. It may mean trying to piece together those wishes, values, or philosophy after the grantor has passed away, in the form of a “preamble,” as we discuss in Chapter 10. It may mean finding ways regularly to remind the beneficiaries of those values through individual or family meetings. It may also mean listening to the beneficiaries and working with them to figure out how to integrate the spirit of the gift meaningfully into their own lives. It is all the more important to take these steps if a trustee finds him- or herself entrusted with spiritless trusts – that is, trusts that embody transfers, set up solely with a view toward tax savings.

2

See Hartley Goldstone, Scotty McLennan, and Keith Whitaker, “The Moral Core of Trusteeship: How to Develop Fiduciary Character.” Trusts & Estates (May 2013), 49–52.