II. Why is a corporate trustee most advantageous for long-term trusts? What is the distinction between the function of an executor and the function of a trustee? Why is it desirable that trustees should be skilled in making investments?

12. Why is a financial corporation likely to be skilled in investing funds?

13. To what extent is an executor liable for losses in buying and

selling securities or other property?

CHAPTER LVIII

COMPARISON OF INDIVIDUAL AND CORPORATE FIDUCIARIES

§ 494. Effect of Family Dissensions

Those who have had any experience in the matter of settling an estate know only too well how many times family dissensions occur, even in families where there has been good feeling until death has taken away the head. The causes for dissension are as numerous as the vagaries of the human mind. The poor executor or person charged with the duty of administering the estate is usually the victim of these family disputes. Often he is a member of the family and has a personal and pecuniary interest in the administration. As a result he is often unjustly charged with unfairness. If he is not a beneficiary, he is, being human, charged with favoritism, justly or unjustly. Most of us are more or less avaricious. We say we want what is coming to us and we want it now. The executor, whether an individual or a corporation, is entitled to a period of time varying from six to eighteen months, depending upon the jurisdiction and upon whether there has been publication for claims; but the beneficiary often does not want to wait all this time.

The executor, however, must protect himself. If he should proceed to satisfy the demands of the insistent beneficiary, he might find himself in a bad plight. He might find that the estate of which he is executor is insolvent or that at best it can pay only a portion of the legacies. If one beneficiary has received his legacy, and as a result creditors or other beneficiaries suffer, the court would surcharge the accounts of the executor

and he would have to make up the amount out of his own pocket. When one considers how insistent some beneficiaries are and how they harass an executor, one may also realize how an executor desirous of pleasing and keeping in the good graces of the legatees might let this very thing happen, and so assume an entirely unjustified risk.

Then again, dissension arises because someone is dissatisfied with the provision made for him, because he is not the executor, or because the executor's method of handling things differs from his ideas. Whatever the cause, the result is always unpleasant and unsatisfactory. The hostility that arises between the fiduciary who is to execute the provisions of the will as trustee and the beneficiary, is often acute at a time when the trustee named in the will has died and it has become necessary to appoint a substitute trustee.

§ 495. A Typical Case

Typical of the cases that result from injudicious selection of fiduciaries, is the following: A certain man possessed of substantial means, consisting for the most part of real property, had a wife and five children. He left all his property in trust for the benefit of his wife during her lifetime, then the real property was to be sold and the proceeds divided into five equal sums, one for each of his five adult children. He appointed his wife sole executrix and trustee. She lived for a number of years, merely collecting the rents and using them herself as beneficiary.

She was inexperienced and left the actual handling of the property to her eldest son and to a confidential clerk who had been in the employ of her husband for many years. The son was unscrupulous and unskilled in business. The confidential clerk, while honest, had had but little business experience in handling real estate. By good fortune rather than as a result of wisdom, the real property was kept intact, but was allowed

to run down. Only such repairs were made to the property as were necessary to keep it rented.

One

When the widow died, application was made to the court by the eldest son to be appointed sole substituted trustee. of the five children objected, and the surrogate after hearing both sides appointed all five of the beneficiaries substituted trustees under the will. A majority of the trustees were desirous of selling the property for any price that they could obtain, irrespective of the real value. However, since in New York it is necessary to have the unanimous consent of all the trustees to sell real estate, the property could not be sold. Real estate dealers soon became aware that there was a family dispute, and believed that by waiting the property could be bought for a comparatively small amount. A beneficial lease could not be entered into, because those who wanted to sell would not consent to a long lease for fear that a sale might be lost. No substantial repairs could be made, although sorely needed.

There was constant litigation for a period of four years, and finally all income was held up for several months. The matter was continuously before the surrogate. Finally, in order to prevent their removal, the trustees agreed to put the property up at public sale. The majority organized a corporation and were able to procure a substantial sum of money to buy the property in, or to protect themselves against a sale for an inadequate price. By a small margin they were able to purchase the property themselves and turn it over to the corporation. Two out of the five beneficiaries would not enter upon this arrangement and claimed their distributive shares entirely. The three that organized the corporation are now enjoying comfortable incomes paid them in the form of dividends.

§ 496. Contrasted Administration by Bank or Trust Company

Had the testator appointed a bank or a trust company as executor or trustee, none of these difficulties would have arisen.

The property would have been kept in order, its value would have been maintained, the public would not have been impressed with the idea of there being a family dispute, and the true value of the property could probably have been obtained at a private sale. All of the family hostilities and unpleasantness would probably have been eliminated because the bank or the trust company would have been impartial. Each question as it arose would be decided on business principles and no one member or branch of the family would be able to influence the fiduciary against the other members.

The corporate fiduciary is always willing to listen to all sides of a question in order to get full information with regard to the facts. It is willing to get the judgment of those who are familiar with the affairs of the trust or with the conditions that exist, and also to listen to the opinions of others; but having done all this, it then makes up an independent decision based upon all of the facts, uinfluenced, unbiased, and unprejudiced. An individual fiduciary, since he is human, is incapable ordinarily of acting without permitting his natural prejudices and other personal influences to come into the matter.

It has been said that the great objection to a bank or a trust company in a fiduciary capacity is that it lacks personal contact or personal interest. Experience shows that too much. of the personal element often results in something other than the best judgment. The foregoing paragraphs illustrate this fact. It is not true, however, that the personal interest is entirely lacking when a bank or a trust company is in charge. If one will consider that, after all, such a fiduciary must act through its officers, that its business success depends upon pleasing those for whom it acts, that of all things the bank or the trust company is desirous of having the very people who have been the beneficiaries under one trust appoint the bank or the trust company as executor or trustee of their own wills, one cannot but believe that the bank has every reason to take