Family Trusts. Keith Whitaker

ups and downs and capacity to bring his or her dreams to life – is the antidote against dependence, entitlement, cynicism, and addiction – addiction to alcohol or drugs as well as addiction to trust distributions.

      We saw that one must begin with the recipient and work back through the system toward developing a highly functioning distributive methodology. From there one must work back to the quality of the trust creator's gift of love, seeking to enhance the life of the beneficiary and thus positively inspiriting that function. If one does so, then the likelihood of the beneficiary's declaring the trust a blessing is fundamentally improved. In turn, a beneficiary who counts his or her trust a blessing will likely want to assure that all family members with trusts are in similar positive situations now and for future generations. Such a person will likely add to family governance and flourishing as he or she seeks to give back to the family positive stories and share positive practices.

      From this vantage point we were able to move toward the question of the nature of a trustee who would be committed to making the trust relationship with the beneficiary one that was mentoring, purposeful (thank you, John A. Warnick), generative, and fulfilling the high calling of regency (thank you, Patricia M. Angus). We recognized that nearly all beneficiary/trustee relationships are arranged marriages, even those in which the beneficiary has a voice in selecting the trustee. This is because the trustee is a part of a legal structure that requires him or her to obey the duty of impartiality, the duty of prudence, and to carry out multiple functions, very few of which are directly related to the well-being of the beneficiary, rather than to the protection of the trust and the trust creator's wishes. Essentially the trustee is married to the trust.

      With this awareness it became clear to us that all too often the trustee is more concerned with the trust as a structure than with the culture that the trust creates. A culture that will succeed for the beneficiary begins with the trust creator's question: am I intending to make a gift of love and a gift that will enhance the beneficiaries' lives? Or am I seeking to make a transfer that solves my tax concerns, that keeps the beneficiaries' creditors from getting my money, and perhaps even creates a memorial to my dream, now embodied in an enterprise that I consider my true child and over which I seek through this trust to perpetuate my control? All these purposes are valid; but which ones lead and which ones follow will determine whether the trust is a blessing or a burden.

      Often, a trustee cannot affirm for the beneficiary a set of positive goals and grow a positive trust culture. Instead, the beneficiary must live in a structure of relationships conditioned by a founder's goals that essentially disparage or ignore the beneficiary. For the beneficiary this is a negative culture, since the beneficiary's concerns will disappear in the endless details of the management of the structure. My thanks to Matthew Wesley for this insight, contained in his brilliant article, “Culture Eats Structure for Breakfast” (Wesley Group, 2015).

      From all these sources and reflections we learned that a good way to diagnose whether the trust was growing a positive, dynamic culture or caught in the negative entropy of a static, suffocating structure was to ask this question: is the trust (guided by the trustee) making dynamic distributions that promote the beneficiary's growth and individuation, or is it making sterile, annuity-type payments that breed beneficiary dependence? The distributive function should really be the focus of mindful trustees and trust creators. Yet in most trusts it is stillborn; it is assumed that it will eventually become an annuity.

      Looking at the generic trustscape today from the vantage point of the beneficiary we realized that most trusts aren't set up to grow excellent beneficiaries. Their cultures do everything but.

      In contrast, we require new cultures and structures and systems that support them, if trusts are to be blessings and help long-term family flourishing. We need trust cultures that seek to grow excellent beneficiaries and structures and systems that support that happening. We need excellent beneficiaries who can in turn assure that their relationships with their trustees are excellent. We need trustees who grow the culture of trusts as gifts from trust creators rather than transfers. We need trust creators who are seriously counseled about what a trust can do and its consequences for another human being for whom it will always be a meteor. If the fundamental responsibility of each of us, when we touch another, is to do no harm – and it is – then how truly sad it is that 80 percent of trust beneficiaries count their trusts as burdens rather than blessings, especially when 90 percent of a family's financial capital will likely end up in trust. Clearly, the risk of harm is great.

      A beneficiary who takes seriously his or her responsibilities will naturally function more effectively within the relationships the trust creates, as he or she comprehends and masters his or her role in the relationship rather than feeling burdened by it. Such beneficiaries are most likely to declare their trusts blessings. Those beneficiaries are also more likely to feel gratitude toward their trust creators and to say, “Not only was I not harmed, I was loved, and you blessed me.” Those beneficiaries are more likely to say to their trustees, “Not only was I not harmed, my life was deeply enhanced by my relationship with you.”

      My colleagues Peter White, Joanie Bronfman, Richard Bakal, Anne D'Andrea, Susan Massenzio, Patricia M. Angus, John A. Warnick, Timothy Belber, Peter Karoff, Michael J. A. Smith, Sara Hamilton, Gail Cohen, Dennis Jaffe, Ellen Perry, Don Kozusko, Davidson Gordon, John Duncan, Christopher Armstrong, Joseph A. Field, Kathy Wiseman, Christian Stewart, Barbara Hauser, Charlotte Beyer, Gregory Curtis, Paul Cameron, Rick Fogg, Ken Polk, Ulrich Burkhard, George Harris, Stephen Hoch, Tim Brown, Rob Kaufold, Miles Padgett, Peter Evans, Robert Pritchard, Scott Peppet, Rob Kaufold, Juan Meyer, and many other pioneers in this work are beginning to unwrap this fraught question of the positive trustscape and the duties and responsibilities it engenders. For too long the “trust wave” has been leading families into entropy and the failed lives of beneficiaries that follow.

      My co-authors, Keith and Hartley, and I are committed to bringing light into this area of unnecessary suffering so that no new beneficiary will ever have to wonder how he or she would answer the poll, and so that current beneficiaries may change their votes – all so the family systems of which they are members will flourish as they do.

      As I have in my previous books I now ask each of you to pick up your staff, put on your round hats, drape your scallop shells around your necks and walk with Keith and Hartley and me through the chapters to come of this guide. Then, if it offers a way forward, walk with me on the journey to growing excellent beneficiaries so all trustscapes may flourish.

Bon Camino!NamasteJames (Jay) E. Hughes Jr.

      PREFACE

      Hartley Goldstone

      Somewhere this week – and likely on Twitter – some version of this headline will appear: “Fallout from Settlement of Grandfather's Estate Splinters Family.”

      In my case, it's also a haunting memory, affixed to a lively image: My grandfather Nathan is looking down from the hereafter. Tears are in his eyes. He slowly shakes his weary head in disbelief: “I never intended for this to happen.”

      The authors' hope, embodied in this book, is that your family will avoid the heartbreak of an estate plan gone very, very wrong.

      What Can This Guide Do for You?

      Until Family Trusts, no single book has offered families and their advisers field-tested ways to communicate about trusts; clarify intentions; develop excellent beneficiaries; and find, prepare, and transition excellent trustees.

      This guide is for the family member who is serving or thinking of serving as trustee. Likewise, it can prove useful if you're an employee of a commercial trust company, private trust company, or family office, or a partner in a professional firm who is responsible for speaking with beneficiaries about qualitative rather than solely quantitative issues.

      More broadly, this guide aims to help anyone else involved with family trusts, including (most importantly) beneficiaries as well as trust creators, trust protectors, trust committee members, and legal counsel.

      We assume that you already have access to some degree of technical information along with excellent technical advisers. We won't be spending much time on taxes, the latest regulations, jurisdictional