Choosing a Trustee can be a difficult decision for many individuals. Often, estate planning attorneys will recommend clients to appoint a Disinterested Trustee for various reasons.  The article below helps to illustrate the concept of a Disinterested Trustee and overall Trustee selection.

Emma Woodhouse, the titular protagonist of Jane Austen’s novel, “Emma,” is a single young woman who will inherit a large estate from her widowed father. She has a sister, Isabella, who has several children with her husband, John Knightley. In this scenario, their father, Mr. Woodhouse, put his assets into a Trust, with equal shares passing to his daughters upon his death.

Upon Mr. Woodhouse’s death, Emma will serve as a Trustee of her own separate share, but she must appoint a “Disinterested Trustee” to serve alongside her. The issue is—Emma cannot decide whom to appoint. This article analyzes the various potential Trustees, using Emma’s needs and the characters from the novel as an example.

A Disinterested Trustee is someone who does not have a beneficial interest in the Trust. In contrast, a Beneficiary serving as Trustee is called an “Interested Trustee”.

Key Players: the Beneficiary, the Grantor, and the Potential Trustees

With the above definition in mind, how do we determine the best Disinterested Trustee for Emma?

Consider the following about the Beneficiary (Emma) and the Grantor/Trust Creator (Mr. Woodhouse):

Emma. Austen describes Emma as “handsome, clever, and rich, with a comfortable home and happy disposition,” but the narrator warns that this idyllic situation comes with its own evils—Emma is overly accustomed to having everything her own way, with “a disposition to think a little too well of herself.” Emma also has a habit of making bad mistakes, like wreaking havoc upon her friend’s love life and publicly insulting her kind neighbor.

Mr. Woodhouse. Where Emma is headstrong and spoiled, Mr. Woodhouse is cautious and conservative. He constantly frets over everyone’s health, his favorite food is gruel, and he believes serving cake at a wedding will put the guests in great peril. According to Austen, “He was…fond of everybody that he was used to and hating to part with them; hating change of every kind.”

Emma’s potential Disinterested Trustees are:

1. Miss Harriet Smith. A dear friend, who grew up without wealth and is perfectly content with very little. She thinks Emma is incapable of wrongdoing, agreeing with her every word.
2. Mr. John Knightley. Emma’s brother-in-law, who happens to be an attorney, but not one with any particular estate planning experience. He has very little patience for Mr. Woodhouse’s constant fretting, and lives far away.
3. Mrs. Anne Weston. Mrs. Weston is Emma’s former governess, turned close friend. She lived with the Woodhouse family for sixteen years and is not afraid to impart her wisdom upon Emma, but Emma is not afraid to ignore her.
4. Mr. George Knightley. A family friend, who manages a large estate himself. He visits the Woodhouse family often and does not hesitate to tell Emma when she is in the wrong.

Analysis – Applying Universal Goals to Emma’s Situation

A Disinterested Trustee can be useful for both personal and legal reasons by helping to provide: (1) objectivity in mentorship, (2) preservation of wealth, and (3) asset protection.

1. Objectivity in Mentorship. Since Disinterested Trustees cannot use Trust assets for themselves, they are able to make decisions without being influenced by their personal interests. This dynamic is distinct from the conflict-of-interest that Interested Trustees experience when making Trust decisions– the conflict between their own wishes and what is best for the Trust.
2. Preservation of Wealth for Future Generations. Disinterested Trustees can help Interested Trustees think through distribution or investment decisions for Beneficiaries, and may withhold distributions from Beneficiaries when appropriate, provided that the decision follows their fiduciary duty to the Trust and its Beneficiaries.
3. Asset Protection. Disinterested Trustees with a broad discretionary distribution standard can withhold assets and protect them from creditors— an indebted Beneficiary may not be able to access assets to pay creditors, provided that the Disinterested Trustee refuses to allow distributions. Further, Disinterested Trustees can be used to keep assets from being included in a Beneficiary’s taxable estate at death.

Applying the above factors to Emma’s situation and her choice of a potential Disinterested Trustee, none of them are strictly a bad choice, but one of the options is better than the others:

1. Miss Harriet Smith. Harriet has the background to encourage frugality, however, she will not stand up to Emma if they disagree. This dynamic could be fine with a reliably responsible Beneficiary, but that is not Emma. Instead, Emma needs someone a little more judicious.
2. Mr. John Knightley. John is a lawyer but knows little about estate planning. He knows and cares for his sister-in-law (Emma). However, Emma dotes on John’s children, and if she were to overspend on them at the risk of her own comfort, John might not intervene.
3. Mrs. Weston. Mrs. Weston is probably the second-best choice here– she and the Woodhouse family are fond of each other, and she is clever enough to know when their concerns are overly silly, yet she still manages to be kind and respectful. Mrs. Weston feels responsible for Emma and gives quality advice, but Emma has a history of not heeding said advice.
4. Mr. George Knightley is the best choice– he has experience managing his own estate, is aware of Mr. Woodhouse’s wishes, and understands a Trustee’s duty to keep them in mind. He demonstrates care for Emma by correcting her when needed, even if it hurts her feelings.^[1]

Conclusion

In the scenario above, Emma Woodhouse needs a Disinterested Trustee who can prevent her from making unadvisable decisions. The issue, however, is that not all Beneficiaries are wise enough to make good decisions concerning Trustee selection and, in some cases, it may not be appropriate to empower the Beneficiary to make such decisions. 

Since each family is unique and has different considerations, a skilled estate planning attorney often plays an important role to help clients evaluate potential Trustee strengths and weaknesses.

If you are seeking counsel on trust and estate planning, we encourage you to contact the attorneys in WCN’s Private Client Services practice. We welcome the opportunity to assist you with specific requirements such as naming a Disinterested Trustee or establishing or revising an estate plan.

Contact us.

This article is not legal advice and should not be taken as such or relied upon as legal advice.

^[1] For those who have read the novel, Mr. George Knightley and Emma are not yet married in this hypothetical.