I had reason the other day to be reflecting on the duties of a trustee to the beneficiaries of a trust and remembered the words famously written by Judge Benjamin Cardozo on this subject nearly a century ago, before he was appointed to the Supreme Court.

"A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior… the level of conduct for fiduciaries [has] been kept at a level higher than that trodden by the crowd."

These words come from the celebrated case of Meinhard v. Salmon, decided by the New York Court of Appeals in 1928. This case concerned a dispute between two men who were in a joint venture, one of whom was presented with a business opportunity that arose out of this enterprise. He seized the opportunity for himself and did not notify his partner that it had been received or give him an opportunity to participate in the opportunity.

Upon learning of the missed opportunity, the excluded partner brought suit claiming he was entitled to be notified about the offer and have a chance to participate in it. In ruling in favor of the excluded partner, Judge Cardozo famously penned the words above. Boy, they don't write 'em like that anymore.

It reminds me of the story about the shop owner whose son, Junior, was home on winter break from his college studies and was helping his father out in the store which was owned by Junior's father and his uncle Pat. One day Junior found a $20 bill on the floor near the cash register. He brought it to his father and said he thought it must have been dropped by Mrs. Miller, as she had just left after buying something and the money hadn't been there prior to her coming in.

Junior asked his father what to do with the money. The father stopped for a moment and got this faraway look in his eyes. Then he said, "Well, this raises an important question." To which Junior replied, "Do you mean I should run after Mrs. Miller and find out if the money is hers?"

To which the father smiled, shook his head, and said, "No, no, no. The question is whether I tell Uncle Pat."

One hears a lot about trusts these days, and all trusts must have a trustee. For some time now, trusts have been promoted (some think over-promoted) as a cure-all for "whatever ails you," most commonly a much-dreaded trip to probate court.

That said, trusts can be very useful in any number of situations. These include clients who want to leave assets to benefit a child or other person who a) has special needs, and the benefactor doesn't want to make them ineligible for benefit programs for which the child or other person would otherwise be eligible, or b) suffers from addictions, self-destructive behavior, or debts, or c) is in a marriage plagued with problems, or d) is engaged in a profession that is subject to litigation, or e) is a spendthrift, or has not reached an age of sufficient maturity to be responsible for an inheritance.

Recently, trusts have attracted new attention as a means to leave an IRA to a beneficiary in a way to reduce the ability of creditors of the beneficiary to gain access to it. This concern has become heightened because of a decision handed down in June of this year by the United States Supreme Court (Clark v. Rameker). This decision held generally that under federal bankruptcy law, the creditors of a beneficiary of an inherited IRA are not prohibited from seeking to satisfy their claims out of an IRA that has been inherited. That is, some important creditor protection aspects of an IRA do not carry over from the person who established it as a retirement vehicle to the person who inherits it. Leaving the IRA in a properly written trust, it is claimed, can protect the IRA from the claims of the creditors of the beneficiary.

A question that often does not get as much attention as it should when a person is setting up a trust: who should be named as the trustee? Who can discharge his or her duties with "not honesty alone, but the punctilio of an honor the most sensitive…?"

This question requires a thoughtful review of the purpose of the trust, and the duties that are involved in administering it. What are the nature of the assets? Is it a trust that is truly and only a probate avoidance device, intended to exist for a short period of time before all assets are distributed? Or is the trust intended to continue on for an indefinite period, with perhaps weighty duties and obligations upon the trustee, such as administering the trust for the benefit of a person with special needs, or one suffering from self-destructive behavior, or who may be a spendthrift and unable to manage money?

The initial thought of most clients is to name one of their children as trustee. In some circumstances this can work well. In others, it can lead to years of fighting; in particularly bad cases, families can disintegrate.

It helps to dwell on the different circumstances that may arise during the administration of the trust, and the possibly divergent interests and needs of the beneficiaries. Consider the pressures that may arise and whether it is wise to burden one child with the responsibility of holding the purse strings over another, or with the personal legal liability for the proper administration of a trust for another.

Most parents think their children will get along and work everything out together after the parents are gone. This certainly does happen in many cases, but then there are the cases where old grudges and slights are rekindled and the children can't agree about much of anything. Except, of course, that everyone's legal fees are too high.

Jim Young is a partner in Andrews & Young P.C., which has offices in Waterford and Groton, and has been serving the southeastern Connecticut area since 1987. He can be reached at 860-444-2101 or at jyoung@andrewsandyoung.com. The statements made in this particular column are not intended to be taken as legal advice for any particular fact situation. Consult with an attorney.