The Importance of a Trustful Trustee

This guest post is from Abigail Hilburn, Regent Law 3L:

A trust enables a third party, the trustee, to take care of assets on behalf of a beneficiary. However, this fiduciary arrangement crumbles when the trustee is no longer trustworthy. The circumstances surrounding the trust established by Princess Bernice Pauahi Bishop (“Princess Bishop”) exemplify the necessity of trustee integrity and accountability.

In 1884, Princess Bishop created a charitable trust intended to provide for the education of native Hawaiian children. As the wealthiest woman in the kingdom of Hawaii at the time, Princess Bishop’s trust included approximately 400,000 acres of Hawaiian fee simple land and was worth approximately six billion dollars in 1998. Furthermore, it produced over a quarter of a billion dollars in interest every single year. However, despite what you may think, this was not a fairytale. In recent years, Princess Bishop’s trust has experienced a complete reorganization. Four of the five trustees were removed from their position by court order. A fifth trustee resigned. The trustees were engaged in a range of misconduct such as intimidating students; running up a $21,000 tab at a risqué club; and being indicted for first degree theft, perjury, and criminal conspiracy.

This situation presents two takeaways. First, the possible need for additional accountability for trustees of charitable trusts. Second, the desperate importance of appointing honorable trustees who possess the utmost integrity in addition to having a system in place that continually ensures your trust is in good hands 136 years later. For a more in depth analysis and discussion, see Of Princesses, Charities, Trustees, and Fairytales: A Lesson of the Simple Wishes of Princess Bernice Pauahi Bishop by Judge Robert Mahealani M. Seto and Professor Lynne Marie Kohm, 1 Hawaii L. Rev. 393 (Winter 1999).

Protecting your family and your estate with a trustful trustee cannot be underestimated.  I’m sure Princess Bishop would echo that sentiment.