When Legacy Becomes a Liability

Case Topic: How to handle a conflicted trustee.

Client Overview

I was engaged as a consultant to support a complex trust administration matter involving two irrevocable trusts—one benefiting the trustee himself and the other his out-of-state brother. These trusts each held a 50% interest in a family-owned manufacturing business (let's call it ABC Widgets) as well as the real estate from which the business operated.

The co-trustee, who also served as the company's operator, had limited background in real estate but deep roots in the business. In addition to ABC Widgets and its real estate, the family also held a few small residential rentals that he was familiar with. But this situation demanded more than familiarity—it required clarity, honesty, and the courage to face hard truths.

The Issue

How do you help a trustee recognize that the business he's spent decades running may no longer serve the interests of the trusts—or the family legacy?

When I entered the picture, the family business was no longer profitable. The co-trustee was drawing a high salary and paying no rent to the trust-owned building, while both trusts were quietly bleeding tens of thousands of dollars annually just to stay afloat.

Worse, the trustee's actions were inadvertently violating his fiduciary responsibility—he was personally benefiting while his brother's trust, which he was also responsible for, received nothing. Deferred maintenance on the building had had left it in poor, almost uninsurable, condition. Rising labor costs and material prices post-COVID made rehabilitation feel out of reach. The widget market had also declined, squeezing the business from every side.

And yet, despite the mounting losses, there was deep resistance to change—emotional ties to the business, loyalty to longtime staff, and years of ingrained identity made the idea of shutting it down almost unthinkable. The situation needed more than a financial analyst. It needed an advisor with empathy, strategy, and resilience.

The Impact

Without intervention, the long-term consequences could have been severe: both trusts were on a path to complete asset diminishment. There was even a risk of legal conflict—the brother, as beneficiary of the second trust, could have sued the trustee for breach of duty. The business's losses were eating away at trust assets, and the building was steadily losing value due to neglect.

But there were personal dynamics at play as well. The co-trustee had to confront a painful question: should he continue running the business for his own income—or fulfill his duty to both trusts, including his brother's? This wasn't just a business decision. It was a family reckoning.

My Approach

I knew from experience that tackling the business head-on would trigger defensiveness. So I started where I sensed more openness: real estate. I drove to the property and met the co-trustee in person. We walked the site together, reviewed its deferred maintenance, and gathered quotes from his preferred contractors. This allowed us to establish trust—both personal and analytical.

Together, we evaluated the building's worth as an investment: Could it be leased to a third party? Could it be sold? Could rental income support necessary repairs? This shared process gave us a foundation of facts, not opinions.

Only after building that rapport did I begin asking questions about the business. He shared financial statements, production bottlenecks, and staffing concerns. I created process maps for the widget-making operation and modeled potential paths forward, including whether a new general manager could revive profitability.

Throughout, I framed everything through the lens of his fiduciary duty. I never had to tell him he was failing. He arrived at that conclusion on his own—because we had built the understanding together. This wasn't me pointing fingers. It was him realizing, with support, that the right decision was to wind down the business and sell the real estate—for the good of the trusts.

The Results

The co-trustee made the courageous decision to close the business, sell its equipment, and list the building for sale. Though the business had no meaningful value beyond its furniture, fixtures, and equipment, the real estate had enough worth to create a significant cash influx for both trusts.

Before I got involved, the trusts were spending tens of thousands of dollars a year to subsidize the business and maintain the property. After our work, each trust received a substantial cash infusion that could be reinvested and allowed to grow—finally serving the long-term interests of both beneficiaries.

The co-trustee stepped into retirement, supported by a trust that now generated income close to what he had previously drawn as salary—without the stress, liability, or internal conflict. His brother's trust, no longer neglected, was finally positioned for meaningful growth and security.

And beyond the dollars, the greatest result was the shift in perspective. The co-trustee came to understand that his role wasn't to preserve a failing legacy, but to protect the assets for the future. That revelation came not from confrontation—but from collaboration.

This case reminded me why I do this work. Families don't just need technical advisors—they need guides who can navigate emotion, history, and complexity with clarity and care. With enough time, empathy, and a well-timed question, you can help someone see their own way to a better path.