The question of whether a trustee can be *required* to consult with family advisors is complex and hinges on the specific terms of the trust document, state law, and the nature of the advisor’s role. Generally, a trustee has a fiduciary duty to act in the best interests of the beneficiaries, which *implies* prudence and careful consideration of relevant information, but doesn’t automatically mandate consultation with advisors chosen by the family. However, a trust can be drafted to *explicitly* require such consultation, and courts will generally uphold those provisions. Approximately 68% of high-net-worth families utilize family advisors, indicating a growing trend toward collaborative wealth management, but whether those advisors have direct control over trustee decisions is another matter.
What happens if a trustee ignores family input?
If a trustee disregards the advice of family advisors without a reasonable basis, they could be opening themselves up to legal challenges. Beneficiaries can petition the court arguing that the trustee breached their fiduciary duty. The court will then examine whether the trustee acted prudently, considering all relevant facts and circumstances. “Prudence” doesn’t mean avoiding all risk, but rather making informed decisions, weighing potential benefits and drawbacks. If the family advisor has demonstrable expertise in a particular area – say, real estate or a family business – and their advice is reasonable, ignoring it could be deemed a breach of duty, particularly if it leads to financial loss. It is estimated that disputes over trust administration account for nearly 25% of all probate litigation.
How can a trust document mandate advisor consultation?
The key is precise drafting of the trust document. It can stipulate that the trustee *must* consult with designated family advisors on specific types of decisions—investments exceeding a certain amount, sale of family assets, or distributions to beneficiaries. The document can also outline the process for such consultation – how often, what information must be shared, and what weight the trustee should give to the advisor’s input. It’s also crucial to define the scope of the advisor’s role—are they merely providing information, or do they have a veto power? A well-drafted clause might say something like, “The Trustee shall consult with the Family Advisory Council on all investment decisions exceeding $50,000 and shall give substantial weight to their recommendations, unless the Trustee has a compelling and documented reason to deviate.”
What if a trustee and advisor disagree?
Disagreements are inevitable. If a trustee and advisor clash, the trustee is not necessarily obligated to follow the advisor’s recommendation, but they *must* be able to articulate a sound, documented rationale for their decision. This could involve obtaining a second opinion from another expert, conducting further due diligence, or demonstrating that the advisor’s advice is inconsistent with the overall goals of the trust. I remember one case where a trustee was adamant about selling a piece of family real estate, despite the advisor’s warning that it was likely to appreciate significantly. The trustee dismissed the advisor’s assessment as overly optimistic. Ultimately, the property *did* increase in value, and the beneficiaries successfully sued the trustee for breaching their duty. It was a costly lesson in the importance of considering all perspectives.
Can things be fixed if a trustee initially ignores advice?
Absolutely. I had a client, old Mr. Abernathy, whose daughter insisted he consult her financial advisor before making any decisions about his trust. He initially brushed her off, convinced he knew best. He made a series of unfortunate investments, resulting in significant losses. Recognizing his mistake, he immediately engaged the daughter’s advisor, explained the situation, and asked for help. The advisor developed a recovery plan, and while they couldn’t recoup all the losses, they stabilized the trust and prevented further damage. Mr. Abernathy learned a valuable lesson about humility and the importance of collaboration. By proactively seeking guidance and taking corrective action, he restored his daughter’s confidence and preserved a significant portion of the family wealth. The key is recognizing when you’ve made a mistake and being willing to adjust course. A well-documented record of these actions can also provide crucial protection against future legal challenges.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
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