[This] unusual clash highlights the risks
for customers when financial companies get in trouble or change hands. That is
so even in the lush world of trust banks, well known for their stability.
Trusts are amazing tools, but
they also can be finicky things. Accordingly, when dealing with trusts and
trustees, be mindful of what and with whom you are dealing.
A timely lesson in the intricacies
and risks of trusts and trust management can be seen in the case of the
Tompkins family and their suit against the Chevy Chase Bank. Recently, the Wall Street Journal reported on the
matter in an article titled A
Family Loses Its Faith in Trust.
As reported in the original
article, the Tompkins family has a massive trust established from the family
wealth of the old family construction business. Indeed, the construction
company worked to build many of the Washington monuments, like the reflecting
pools at the Lincoln Memorial, and the trust they established has a current
valuation of around $100 million. Today, the trust resides with the Chevy Chase
Bank, having been moved there seven years ago.
Now, however, the family, or
some members of the family, desperately want to move the trust and can’t. Why?
A trust is a legal arrangement subject to myriad laws, not to mention the
formative intentions of the original trust creator. In addition, when the
trustee is a bank, then the trust is further subject to banker’s rules and
contracts. In this case, the Tompkins signed up with the utmost haste (as they
escaped another former bank as trustee) and apparently they simply didn’t pay
attention to the fine print in the Chevy Chase Bank trustee contract.
According to the fine print, the
trust can only be moved from the Chevy Chase Bank when all of the beneficiaries agree. This is nigh impossible in this
case, especially given that there are 94 beneficiaries, each of whom must agree.
In the meantime, the bank refuses to release the trust and its assets because,
they argue (and rightly under the contract), the bank has a duty to all the beneficiaries.
One of the teaching points to
take from this case is the importance of reading the fine print when appointing
a trustee. That is a given. However, when a trust is intended to span multiple
generations you really need to consider this issue of who (or what) will serve
as the trustee. Competent counsel can help you navigate your options.
Reference: The Wall Street
Journal (March 21, 2011) “A
Family Loses Its Faith in Trust”