Step into the “way back” machine when a younger media mogul, Logan Roy, was contemplating the succession of his empire and grooming his children by giving them management positions in the company. This is a common scenario in business, as well as estate planning. Unfortunately, often due to inadequate communication, issues can erupt between the generations. This is also true in trusts, where the parents may appoint the children, or some of the children, as trustees.
A potentially dangerous scenario can occur when the drafting directions indicate the eldest child should serve in all the fiduciary and management appointments, even if they are not intellectually or constitutionally capable in serving in the role. While less common today, we do still see this in older trusts in which terms are still in effect. A particular problem arises when a sibling gets to make discretionary distributions for another sibling. There’s almost always personal politics , i.e. one perceives the other as not working as hard, or having it easier, all of which lead to hiccups, delays, and malfeasance, in administration. In making trustee appointments, one’s considerations should be based on acumen and personality, not simply order of birth. Consider the circumstance where the oldest child is given the appointment, but the youngest is the one who is actually employed by, or participates in, the family business. Arguably, the youngest would be in the better position to continue the business.
Clients often ask, “how do I balance that and give the youngest control without hurting the feelings of the oldest?” My response: “Communication.” It is always best, whenever possible, that the family hold a meeting – or series of meetings – to discuss transitions in control and trusteeship. Your estate planner can help to facilitate this conversation. It is never too early to open the lines of communication.
