Family Office Exchange Addresses Information Gap on Role of Trustees

Workshops consider roles and responsibilities of grantors, beneficiaries, trustees

Many wealthy families use trusts for their estate planning, but as the regulation and complexity of investments increase, an information gap has developed between those involved with trusts and facts on the ground.

Earlier this year, Family Office Exchange set about trying to close that gap at the request of two of its largest family office members who said they wanted education for their trustees, but had been unable to find programs to provide it, according to Marvin Pollack, FOX’s managing director for marketing and strategy.

The organization conducted a sold-out workshop on trusts in New York in June, and has scheduled a second one in San Francisco for Nov. 29–30.

The majority of participants in the New York event were family office executives and staff members, along with a good number of family members, Pollack said. More than half identified themselves as trustees, and upward of a third said they were either lawyers or CPAs.

Pollack noted that the need for education was on full display during the New York workshop. Family members who were grantors were trying to determine which made most sense for them: a personal trustee, a corporate one or a personal trust company. This turns out not to be a simple matter, especially for those with complex wealth holdings, he said.

A personal trustee who performs poorly can generate hard feelings among relatives or close friends or, worse, prompt a lawsuit. Moreover, identifying someone with both the technical skills to manage investments and the emotional closeness with the grantor can be challenging.

As for corporate trustees, given the turmoil among financial institutions resulting from the financial crisis, people no longer feel comfortable that there will be continuity across generations. And personal trust companies, though a potentially good option, will require a complete restructuring of a family office.

Beneficiaries among family members attending the New York workshop felt at odds about the trust structures of their families, but did not know what they could do about it, or even whether they had any options, Pollack said.

“In many cases, understanding the role of trustee and where he or she has some flexibility alone is a good start to their education and understanding their own rights as beneficiaries and where the limitations are,” he said.

Trustees themselves operate in an especially anomalous environment. Pollack said several attendees who engaged in Q&A with speakers identified themselves as both family office executives and trustees for a family. They acknowledged the almost frightening burden of their position, but said they had not felt they could easily turn down a family’s request that they fill both roles.

“It’s hard to say no, but then again it’s a huge administrative responsibility and liability when you consider the complexity of the wealth holdings at this level of wealth,” Pollack said.

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