Wills, Trusts and Estates

Numerous banks act as trustees for trusts established many years ago with small banks, some of which have been acquired many times over. The successors are typically very large banks with no personal relationship with the beneficiaries of the affected trusts.

Under the Uniform Trust Code, which has now been enacted into law in a number of states, it has become much easier for the beneficiaries of trusts to change trustees, typically for replacements which are local, smaller and/or which charge lower fees and expenses. Even in those states where it is not as easy for the beneficiaries of trusts to obtain replacements under the new law, many bank trustees have engaged in practices which put their own interests before those of the beneficiaries, which they are legally obligated to do. All trustees have what are known as fiduciary duties to the beneficiaries, the most important of which is the duty of loyalty. Many banks, because of their other business interests, have conflicts of interests (between their own interests and those of the beneficiaries) and, if they put their own interests first, this fact may be used as a basis for obtaining a replacement trustee.

Many banks also control their own "families" of mutual funds. When the assets of trust accounts, estates (when the bank is acting as executor or personal representative) or other types of fiduciary accounts are "invested" in the shares of these captive mutual funds, the banks may be putting their own interests first. Many of these mutual funds are charged fees and expenses (by subsidiaries or affiliates of the banks) that are both excessive and, when taken together with the banks' direct charges for acting as a fiduciary, the total expenses of maintaining the fiduciary accounts are higher than they would be if the banks were to make investments directly.

In addition, some banks "change the rules" unilaterally by charging trust and other fiduciary accounts fees and expenses above those established when the trust/probate or similar relationships are established. Even if the beneficiaries have "consented" to these changes, they may not be binding and may also be a basis for changing fiduciaries.

When problems are encountered by beneficiaries of fiduciary accounts, it is typically difficult to obtain a lawyer to provide objective advice and/or to challenge a bank. For the most part, this is due to the fact that the banks make referrals to the lawyers who draft wills and trust documents and those lawyers are not about to "bite the hand of the one who feeds them." The lawyers, many of whom may have small practices, may well be intimidated by banks or may have no experience with litigation which frequently involves complicated financial issues and/or they may be unwilling to represent clients on a contingent-fee basis, which is the only way to avoid the risk of enormous legal expenses.

If you have encountered issues such as those referred to above, please do not hesitate to contact me without obligation.

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