The Trustee–Beneficiary Relationship: Building Trust Through Understanding, Process, & Accounting

You’re facing a new trustee appointment with a trust you didn’t write and beneficiaries you didn’t previously know. This article sets out an indelible process to help you build a relationship, establish rapport, and do well in your new position.

Beneficiaries need to know what the trust does and doesn’t allow.

Most of the time after a death or major gift, trust beneficiaries are thinking simply, “How do I get my hands on the money?” They really don’t understand the concept of a trust for their benefit. They may have heard about the trust from the grantors, but what do they really know about it? Do the beneficiaries know, as the case may be, that the trust is not supposed to be totally spent, but to last for a period of time or for their lifetimes? Is the trust conservative or liberal in its concept of distributions? Does it provide “income only,” or broad discretion to distribute principal as well? What does the trust say about the purpose of principal distributions?

Are the motives behind the trust to provide for material improvement or, somewhat different, for improvements in well-being, such as money for health, education, training, experiential travel, setting and achieving goals, providing for positive experiences, and building relationships – and not just giving out more spending money? These questions need to be discussed and answered to the best of your ability.

Recently, I came across a trust where I had to decide what was to be done for the beneficiary’s “advancement.” Not a defined term, and not appearing in case law in the Bahamas (where the trust was written), in Delaware where the trust was governed, or in Massachusetts where I was administering it. The grantor, still living, was no help. No one had ever asked him, nor had he thought about it when he signed the trust. We chose to take a broad view of what the trust could be used to support, backed up by the Webster’s Dictionary definition of advancement, tempered by what the grantor would approve of as advancing the beneficiary’s interests.

Information on how the trust donors felt about these topics, as well as their impression of the beneficiary’s relationship with money, are priceless data points to inform your relationship. Such information is a rare commodity, however. Unless the trust grantor left written instructions, or you knew them during their lifetime, there’s not much to go by other than the plain reading of the text.

Beneficiaries need to have faith in your process.

Beneficiaries will usually want a degree of involvement in the investments of the trust for which there should be periodic meetings or calls. They deserve to know you will be holding a schedule of one-on-ones where the beneficiary can open up about what is happening in their lives. They are entitled to know the rules of the relationship with the trustee regarding access for questions and concerns between meetings.

In meetings, there is potentially a huge range of topics to go over together, from education to living circumstances, personal goals, travel, retirement, long-term care, and family concerns. In a relatively new relationship as trustee, I did not know the trust grantor and am just getting to know the beneficiaries. All that the previous trustee did was give out quarterly distributions without asking how the trust could be helpful in providing support and maintenance. I am thinking that my broad discretion may allow the 70-year-old primary beneficiary to enjoy some new, positive life experiences, and feel she has a shield against the costs of getting older. These are not topics anyone has ever discussed with her before.

The first thing I offered was a schedule of meetings for us to get acquainted to get off on the right foot.

Accountings need to be thorough and have to make sense to the beneficiary.

Nothing says “I’m trustworthy” like being transparent with your own commission and expenses. Likewise, providing a clear view of the assets of the trust and what is happening quarter-to-quarter will go a long way toward providing assurance. Not every beneficiary is accustomed to looking at financials. They don’t understand how the trust is invested, and they won’t trust what they don’t understand. So, take the accounting to them at their level. Give them a score of a low, medium, or high level of comprehension. Unless they assure you they are following everything that is going on financially, break it down into comprehendible, bitesize pieces they can follow.

Explain what you are doing as the trustee. Perhaps show them hourly records or a list of tasks that you conduct on a daily, weekly, monthly, and annual basis. Like it or not, you work for them and they are entitled to be well informed of your efforts on their behalf.

At the end of the day, treat the beneficiary like you would want to be treated. Offer respect, a helpful attitude, openness, transparency, and an attentive ear. Come back again and again to the purpose of the trust as it applies to each beneficiary. Make your accountings clear and useful and offer to help to interpret them, all the while letting the beneficiary know that they are entitled to seek their own counsel as they see fit if you have tried but still cannot satisfy the beneficiaries concerning the trust administration, for whatever reason.

Are you a trustee? Let’s get you set up for a trusted relationship with our back office or as a co-trustee with our professional trustee firm.