You never get a second chance at a first impression. True in any business, this saying is especially important when you’re a fiduciary working with trust beneficiaries.
Your ultimate goal is to create mutually respectful and productive relationships that improve your beneficiaries’ quality of life. But make no mistake: These relationships, by their very nature, can be fraught from the beginning. Beneficiaries may feel that having a fiduciary requires them to surrender some personal autonomy. This can be a difficult adjustment, to say the least.
“You have to imagine that some beneficiaries, in something like a personal injury settlement, have always been in charge of their own finances, and now they’re supposed to say ‘Here are the keys to everything I own’ to some nameless person,” says Peter J. Wall, Director of Fiduciary Services for True Link Financial. “That’s a challenging position to put someone in.”
Fiduciaries should approach this relationship carefully and strategically to make sure it gets started on the right foot. If not, they risk creating a dynamic that could result in headaches and extra work for years to come.
That’s why it’s critical to set clear parameters early on. That way, you can provide exemplary service, head off unnecessary misunderstandings, and alleviate tension at the outset.
Since fiduciaries don’t receive formal training in relationship management, they often have to learn how to navigate these situations on their own. Review the tips below to be better prepared to manage beneficiary expectations:
1) Find common ground
Fiduciaries should start creating goodwill and establishing a personal connection with their beneficiaries from the first phone call or meeting. Wall, who’s also a jazz musician, likes to inquire about their musical tastes or their current or former professions. “It makes you a person,” he says. “You’re not a nebulous, unknown entity who’s all of a sudden in charge of their money.”
Haley Greer, J.D., Director of Master Pooled Trust at The Arc of Texas, which advocates for more than 500,000 Texans with intellectual and developmental disabilities, uses the tried-and-true tactic of chatting about where they grew up in Texas and what they were involved in growing up. “I mention that I was in Future Farmers of America. You have to feel a person out and learn what makes them tick,” she says.
Her organization has a standard practice of making “welcome calls” to create a personal relationship with new clients and let them know that a toolkit is being mailed to them. It’s a helpful way to educate them about the role of The Arc of Texas, and the calls are often made by their benefits resource specialist who is solely focused on supporting individuals with disabilities. “She understands the ins and outs of receiving SSI and is able to empathize with the challenges they’re facing,” says Greer. “It gives people a way to connect with us.”
2) Set clear boundaries
It’s not always clear to the beneficiary what their trustee can approve. Explaining the complexities of trustee duties can be especially relevant in cases where clients have been led to believe a large settlement can be spent on homes, cars, and vacations for the entire family.
“We’re left holding the bag, so we need to set clear expectations,” says Greer. “I have to say, ‘You can’t all go on a cruise. I’m not trying to be mean, but the rules don’t allow money to be spent this way.’ You have to establish what the reality is, even when you’re delivering disappointing news.” Greer reminds them that her job is to protect the beneficiary, their public benefits, and the trust – and give them the best quality of life possible.
Wall frequently finds himself explaining why regulations prevent him from approving a request. “Often a beneficiary has been waiting for a settlement for a few years. They already know that obtaining benefits can be challenging,” he says. “If you have to deny a request, you can say, ‘I’m sorry, I don’t like these rules either. But preserving your benefits is of utmost importance.’”
For people not receiving public benefits, like those with an inherited trust, Wall might refer to their parents’ intentions to explain the decisions he’s required to make by saying, “I’m bound by the four corners of the document, and my hands are tied. I’m sorry, but I’m legally required to follow the guidelines your parents left behind.”
3) Start the relationship before a grantor’s death
You don’t want to meet a beneficiary for the first time in the middle of the emotional upheaval of a grantor’s death. “Frequently the parent is a best friend, roommate, and lifeline to the beneficiary’s finances. For them to lose all of that at once is really traumatic,” says Wall.
That’s why he recommends getting beneficiaries used to having someone manage their money at the time a trust is drafted. “I tell them to give Haley a call now and start having them use some services. So when the grantor passes away, they’re already used to working with a case manager,” he says.
Greer recommends starting beneficiaries with $100 a month on a True Link Card. “It’s a small step in the right direction and gets them used to keeping track of receipts,” she says. Her favorite example was giving a client a weekly allowance for a mani-pedi. “We did it for health reasons because she gets ingrown toenails,” says Greer. “But it’s also a fun pampering thing that helps us establish a relationship with her.”
For testamentary trusts, Greer recommends parents create a “letter of intent” so she can get to know more about a beneficiary before a parent dies. (The Arc of Texas offers a template on its website.) “I want a good understanding of that child’s needs because it will help me make better distribution decisions,” she says.
4) Identify the beneficiary’s goals from the beginning
One way to make sure you’re on the same page is to make sure beneficiaries’ goals are on the page—literally. During one of his first meetings with a beneficiary, Wall discusses their trust wish list. “I ask, ‘What are your optimal outcomes? What else do you want to do with these funds?’” says Wall. “The goal is to get into agreement now so we can refer back to it when they ask for something that’s out of reach.”
Putting these tips into practice may take a little more time up front, but it pays off in the long run. Not only will the relationships go more smoothly, but your job will also be more satisfying, and your beneficiaries will be happier. “Instead of feeling like you’re at odds with your beneficiaries, you’ll be able to work collaboratively,” says Wall. “That feels good for everyone.”
Want to learn more best practices for trustee obligations and administration? Click here to register for a continuing education course featuring Peter J. Wall and Haley Greer.