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A Cautionary Tale: Be Careful When Naming Corporate Trustees

  Unusual clash highlights the risks for customers when financial companies get in trouble or change hands. That is so even in the lush world of trust banks, well known for their stability.

Trusts are amazing tools, but they also can be finicky things. Accordingly, when dealing with trusts and trustees, be mindful of what and with whom you are dealing.

A timely lesson in the intricacies and risks of trusts and trust management can be seen in the case of the Tompkins family and their suit against the Chevy Chase Bank. Recently, the Wall Street Journal reported on the matter in an article titled A Family Loses Its Faith in Trust.

As reported in the original article, the Tompkins family has a massive trust established from the family wealth of the old family construction business. Indeed, the construction company worked to build many of the Washington monuments, like the reflecting pools at the Lincoln Memorial, and the trust they established has a current valuation of around $100 million. Today, the trust resides with the Chevy Chase Bank, having been moved there seven years ago.

Now, however, the family, or some members of the family, desperately want to move the trust and can’t. Why?  In this case, the Tompkins signed up with the utmost haste (as they escaped another former bank as trustee) and apparently they simply didn’t pay attention to the fine print in the Chevy Chase Bank trustee contract.

According to the fine print, the trust can only be moved from the Chevy Chase Bank when all of the beneficiaries agree. This is nigh impossible in this case, especially given that there are 94 beneficiaries, each of whom must agree. In the meantime, the bank refuses to release the trust and its assets because, they argue (and rightly under the contract), the bank has a duty to all the beneficiaries.

One of the teaching points to take from this case is the importance of reading the fine print when appointing a trustee. That is a given. However, when a trust is intended to span multiple generations you really need to consider this issue of who (or what) will serve as the trustee. Competent counsel can help you navigate your options.

You can learn more about elder law planning in the Elder Law Planning on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.

Reference: The Wall Street Journal (March 21, 2011) “A Family Loses Its Faith in Trust

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