Tips for trustees on working with NextGen beneficiaries

By Pamela Lucina

The primary criterion for choosing a trustee is the ability to communicate in a way that optimizes the chances for the relationship to thrive and for the trust to function as originally intended: as a tool for security and happiness. Here are some steps you can take to increase the likelihood of a productive relationship between trustee and beneficiary:

• Identify beneficiary expectations set by the grantor. If possible, this should be discussed very clearly, as early as possible before a trustee is chosen. Discuss the values that the grantor is trying to incent with the trust. If the grantor is deceased, the trustee could interview family members or the family office to understand the grantor’s goals. It may be helpful for the beneficiary to participate in these interviews.

• Work to understand what drives the beneficiary. The beneficiary’s main motivations may not be monetary. A trustee should strive to understands what makes the beneficiary tick. With this understanding, the trustee should seek to align investments with the beneficiary’s personal values, while honoring the parameters of the trust.

• Articulate the trust’s terms and goals in plain language. A trust document at its core is a contract. The beneficiary must understand the agreement in order to have a sense of what is reasonable and what is not. However, the trustee should avoid lecturing and instead mentor the beneficiary, or should work with qualified advisers who can readily connect and explain trust and financial concepts in language the beneficiary readily understands. The trustee, and any other advisers, should be respectful and approachable so the beneficiary doesn’t feel embarrassed to ask for help going forward.

• Show graphically how proposed investments impact the trust over time, as well as the risk of concentration and the effects of overspending. The trustee should explain factors affecting an investment’s performance, and use real-life examples to illustrate how poorly managed resources can be quickly and irreversibly depleted.

• Encourage the beneficiary to take an active role. The beneficiary should endeavor to learn more about the trust and the constraints of its structure, and should take steps to provide budgets and business plans behind their investment ideas.

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