What are Bank Beneficiaries Unhappy About?
Interviewer: Thanks for taking the time for this interview. I just want to let everyone know that because you are currently employed as a trust officer at a major bank that we are protecting your identity here.
Trust Officer: Yes, thank you. I love my job but I also see its shortcomings and I want to help trust beneficiaries better understand how to deal with their trusts. Frankly, it would make all of our lives easier.
Interviewer: So what are the vast majority of complaints you hear?
Trust Officer: Lack of communication, poor communication, neglect and turnover.
Interviewer: Any others?
Trust Officer: Sometimes asset allocation complaints or conflicting expectations between income beneficiaries and remaindermen. It is so important to manage expectations.
Interviewer: How so?
Trust Officer: Often beneficiaries cast suspicion on the bank for wrongdoing but really most often it is a case of benign neglect rather than intentional acts.
Misunderstandings percolate for years. Then the trust officer is surprised to get a nasty legal letter from a beneficiary who they haven’t heard from in years.
Interviewer: Is there a better approach?
Trust Officer: Yes, a friendly approach with your trustee is always better and gets more favorable results.
Situations where a “heartless corporate trustee” does wrong is rare.
It is better to say “Something is not quite right. Can we get together to go over this?”
Litigation with aggressive letters and depositions puts off negotiations and triggers a level of formality.
We are required to refer the matter to in house counsel with no comment.
It shuts down all communication and negotiation.
Interviewer: So what is the problem in your opinion?
Trust Officer: General litigators, more than trust and estate litigators, are inflaming matters by promising big judgements and by casting banks as evil entities.
Better to use calm professionals who can talk about their concerns in person.
Interviewer: What can trust officers do to avoid litigation?
Trust Officer: Trustees may come across as condescending or hostile. It is important for trust officers to remain friendly and accessible.
Interviewer: Would beneficiaries be better off with individual trustees?
Trust Officer: No, there are generally more problems with individual trustees who are all over the board in terms of their sophistication (for example, not notifying beneficiaries of their total return options).
Interviewer: Yes, I had this situation once with a retired attorney trustee who had not heard about total return distributions several years after they became law and banks were offering them. The beneficiaries had no idea they had this option and the retired attorney trustee was too out of touch with fiduciary law to know to offer it. Frankly, it would have made the trustee’s life easier too by automating distributions.
Trust officer: Yes, that is common.
Interviewer: So what can beneficiaries do to avoid litigation?
Trust Officer: Send kind letters. Trustees are not looking to give beneficiaries a hard time. Many letters sound overwrought and overdramatic.
Interviewer: Yes, it sounds like beneficiaries wait until they are fuming mad to write a letter. So what are other solutions you see in addition to kind letters?
Trust Officer: Ancillary remove and replace documents with a 2-3 year waiting period have been used to successfully settle disputes.
Interviewer: Can you explain that to us?
Trust Officer: Yes, essentially we agree to a reasonable waiting period where we try to get the trust “back on track.” If the beneficiaries are still unhappy with us, we agree to resign in favor of a replacement trustee such as another bank. Even though the trust agreement did not provide for this, we agree to it in order to settle the dispute and avoid litigation.
Interviewer: Then what happens if the beneficiaries choose to remove the bank after that 2-3 years?
Trust Officer: We prepare an accounting (either formal for court approval or informal without court approval) and then resign.
Interviewer: Well, thank you for your insights and your candor today. I know many beneficiaries will put this extremely valuable information to use immediately.