Julie Nelson (85) was the income beneficiary of a series of Family Trusts that had been in place for 20-30 years, totaling $15 million. Julie had lost two previous husbands and lived in a high-end senior care facility. Julie had three daughters: Ann, Barb and Cathy, all in their fifties. The daughters were the remainder beneficiaries of the various trusts, after Julie’s death. Julie was a singularly generous, kind and decent person, and deeply cared for the well-being of her daughters.
- Ann was married to a successful lawyer and lived in New York and Arizona. Julie gave Ann, her husband and son annual gift exemption amounts (currently $14,000 each).
- Barb was married to a health care worker who caught a rare disease and recently passed away after a ten year period of pain and suffering. Barb worked part time at a department store because she was caring for her husband. Julie has been assisting Barb and her husband financially throughout the period, approximately $70,000 per year, in addition to gifting annual gift exemption amounts to each of Barb, her husband and their two children.
- Cathy married an unsuccessful insurance agent. Julie has supported Cathy and her husband to the extent of $125,000-$150,000 per year, plus annual gift exemption amounts for each of Cathy, her husband and their three sons.
- Julie was deeply stressed over the situations of her three daughters. She felt that she should treat her three daughters equitably, if not equally, and was uncomfortable with the disparate treatment of the three. Barb and Cathy felt that they had very legitimate needs for their gifts. Ann’s husband was Julie’s counsellor in financial matters and he felt that whatever distributions were made should be made equally, without regard to need.
- We were able to tend to Julie’s financial needs easily and seamlessly. She lived relatively modestly and only spent large sums of money on her daughters. We paid her bills and balanced her personal checking account. We were involved in her complete financial life and we enjoyed every day of it. The interaction with the daughters, however, was more complex. Each of the daughters, and their respective surviving spouses, had differing concerns, priorities and agendas. Family meetings were not particularly useful and all productive discussions were one-to-one, not as a group. These discussions were, understandably, difficult for Julie, who felt guilty about treating her three daughters differently.
- The situation was, at least in part, solved by the agreement that we, as Trustee, would keep an accounting of gifts/distributions that Julie requested be made to the three daughters (as advances) and would make equalizing adjustments at the future time of Julie’s death, prior to final distributions. All parties seemed satisfied. Julie seemed comfortable with the funds being made available to satisfy needs and the others accepted our role in accounting, as an independent experienced arbiter.
The role of corporate fiduciary is often tricky. Tending to Julie’s individual needs was easy, but the broader family issues were much tougher. The role of the fiduciary is to make the hard calls and implement them, taking the onus from the grantor of the trust or generous parent, for the common good of all current and future beneficiaries.