Balancing the Trustee & Beneficiary Relationship

Balancing the relationship between a trustee and beneficiary can be delicate, and if it is not handled properly the results can be costly problems and years of frustration. The beneficiaries are set to inherit valuables, homes, stock, and other assets. Yet it is the very nature of those assets that can cause tension with a trustee who controls the purse strings. However, there are some tips that can help ease the tension and create a good relationship between the person in charge of managing a trust and those set to inherit it.

Address Sources of Tension

The entire purpose of a trustee is to be a barrier between an heir and the money, so there are natural sources of tension between a trustee and a beneficiary. Most often, an heir wants access to their inheritance faster, and the trustee is hesitant out of fear that the money will be spent unwisely.

If a beneficiary wants access to the trust earlier, they should look into the terms of the trust and see if a case can be made to the trustee. However, some trusts give a lot of leeway to the trustee to change the terms as the circumstances change.

Both parties need to try and see the other perspective. For example, a beneficiary may think that taking money from the trust to put a down payment on a house is a good reason for distributions, but the trustee may be hesitant because money was distributed recently and wants to grow the portfolio before distributing again.

Discuss Money Issues

Fees are often another source of conflict between a trustee and beneficiary. The terms for fees can vary widely: private trustees can set their own terms, some states offer guidelines for fees, and other trustees do it for free as a personal favor to the trust creator. If a beneficiary thinks that the fees are too steep, he may hire another person to run the investment of the trust funds.

Splitting the roles may help keep the trustee’s costs down and thereby ease tension with the beneficiary. However, another money issue that sometimes arises is the actual investment of trust funds. Beneficiaries need to keep an eye on how the funds are being invested, and it should be tailored to the needs of the beneficiary at that time in their life.

Try to Resolve Disputes

If the beneficiary is unhappy with the way that the trust is being handled, the first thing to do is open the lines of communication to the trustee before doing something drastic, like litigating. Try setting a meeting with the trustee, and feel free to bring an attorney to mediate the situation.

First, try to figure out the reasoning behind the trustee’s actions because there may be a good reason why the decision was made. Also, try to seek compromise between the wishes as a beneficiary and the trustee. If the relationship is beyond saving, a change in trustee may be necessary. However, whenever possible, try to resolve disputes before taking more serious action.

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