The Case for Selecting a Professional Trustee in Planned Giving

By Michael T. Alexander, J. D.
Managing Principal, Private Trust Management Group

Introduction

This article discusses the advantages of choosing a professional trustee-fiduciary in planned giving situations. Often overlooked by estate planners, the identification and appointment of a qualified successor trustee is crucial to the protection of an elderly benefactor against personal and financial abuse as well as the prompt and efficient administration of an estate both before and after passing. For charities and other beneficiaries, failing to select a competent, experienced trustee can be a costly oversight.

Background

Planned giving accounts for a huge portion of the gifts received by successful charities and nonprofit organizations. Charities cultivate donor relationships, sometimes for years. Because of the close working relationship that often develops in the estate planning process between the benefactor and the charity, the charity is well positioned to advise and assist in the selection of trustee. In fact, benefactors often ask the charity to serve in this capacity.

Because the benefactor and the charity have a common goal of making sure the bequest arrives intact, the donor often wants to name the charity as successor trustee. Whether or not the charity chooses to serve as trustee, it certainly has a vested interest in who is chosen to serve in this capacity. Below are four situations where appointing a professional fiduciary should be strongly considered.

Four Situations Where Professional Trustee Should Be Named

1. No family.  The most obvious situation for the selection of a professional fiduciary is where the benefactor either has no surviving family or has no one close enough to care for them and manage their affairs when they become incapacitated. 
   
2. Family or Institution Not Neutral.  A trustee must be neutral and avoid any conflict of interest.   Longstanding family conflicts – often going back to childhood – often erupt when the parent or family member dies, especially when division is perceived as unequal or unfair.  Litigation is almost inevitable.  Selecting a professional fiduciary is the best antidote to family suspicion and legal anarchy. 
   
3. Risk of Elder Abuse.    Elders are often isolated and alienated from family, friends, and the outside world by caregivers or other family members.  They are uniquely vulnerable to coercion and undue influence.  Thus, a professional fiduciary should be selected any time there is a risk of physical, psychological, or financial elder abuse.
   
4. Professional Administration Required.  Estate planners and charities should strongly consider the selection of a professional fiduciary in all cases.  Incompetency is as dangerous as dishonesty.  The fact is that the law as well as the assets themselves are increasingly complex.   As we often say, 99% of all executors and trustees have one thing in common:  They have never done it before and they will never do it again.  It is a difficult and often thankless task.  The actual day-to-day administration of an estate is a black art.  As with all things, an experienced professional will be able to fully administer an estate “cheaper, better, faster.”

Discussion

In estate planning, it is easier to view death as a single event which triggers the ultimate distribution of the estate. Death is not an event so much as a slow process of decline, disability, and incapacity. When this happens, the incapacitated person often comes under the complete control and influence of a few people. The person who holds the health care directive controls the elder’s treatment and can even limit who the elder gets to talk to. That same person often holds the elder’s power of attorney and controls all the money and is named as the successor trustee. This is the “trifecta” of control, a “perfect storm.”

Elder Abuse

This is very fertile soil for elder abuse which takes many forms, ranging from actual physical abuse and neglect of the elder to the financial plunder of the elder’s estate. The latter often entails changes in the estate plan to benefit those who have now isolated and have complete control of the elder.

Unique Risks for Charities

In abuse situations, the family often gets there before anyone else. When they do, the first thing they do is find the estate planning documents. They are “shocked” by the elder’s plans to make a gift to charity, or anyone else for that matter. They immediately start pressuring the elder to change the will and trust to correct this obvious “injustice.” This often includes taking the elder to a new attorney who is more pliable than the one who advised the elder for years. The problem for the charity is that it has no idea that it is happening. It stops hearing from the benefactor. Correspondence goes unanswered. The charity is often the last to know.

Very likely, the caregivers, the successor trustee and the holder of the power of attorney are family members and, therefore, direct competitors for the elder’s largess. Unfortunately, this situation was created by the estate plan itself which failed to designate a truly neutral third party to serve as trustee.

Advantages of Selecting a Professional Fiduciary

• Professional fiduciaries are, by definition, neutral.  They have no interest in the estate and no stake in the outcome of any litigation.
• Professional fiduciaries are mandated reporters.  By law, a professional fiduciary must report any physical, emotional or financial abuse of an elder.
• Professional fiduciaries have deep and wide experience in the administration of estates.  Professional fiduciaries who actually practice in this area of estates have unique skills and experience that ensure the competent and expeditious administration of the estate.

Conclusion

To protect the elderly benefactor and preserve the charitable intentions expressed in the estate planning documents, planned giving professionals as well as attorneys and other trusted advisors should strongly consider the wisdom and value of appointing an independent, experienced professional trustee and fiduciary.