The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Down with the Bundled Trust! Up with the Open-Architecture Trust!

Given the hopeless and infuriating state of the trust business these days, families could be forgiven for taking to the barricades and demanding that the entire 1,000-year edifice of the common-law trust be pulled down so that we can start over. Of course, I am aware, with Anatole France,¹¹ that it is rarely the wealthy families who are manning the barricades. And yet families are in effect dismantling the bundled trust as we speak, replacing it with what I have dubbed the open-architecture trust. At its core, the open-architecture trust asks the simple question: For each activity that has historically fallen under the heretofore bundled umbrella of the trust, what is the best practice today? Let's ask—and answer—those questions for ourselves.

Activities Required to Operate a Trust

The operation of a trust requires that the assets be held in safekeeping, that the assets be capably managed, that tax issues be addressed and tax returns be filed, that administration and bookkeeping be handled, and that there be in existence a fiduciary capable of making decisions that cannot legally be made by settlors, beneficiaries, or other disqualified persons. These activities can be bundled together and carried out by one institution, or they can be unbundled and evaluated separately, determining what the best practice might be in each case and pursuing that practice unless the cost is prohibitive. Let's examine each of these ...