‘Orphan’ Trusts Benefit Lawyers Who Control Them
Lawyers and banks have wide latitude to control “orphan” trusts established in wills to benefit charities by donors with no family members to oversee distributions.
The New York Times studied such trusts and found that small, local grant recipients who originally benefit often see less money over time or are dropped entirely as beneficiaries. Lawyers and banks overseeing the trusts sometimes make changes simply because the of prestige conferred.
In some cases lawyers overseeing trusts have been accused of excessive billing. One investigation by the New York attorney general alleged that foundations overseen by two lawyers acting as paid trustees made grants to their alma maters, their synagogues, and the schools where they taught.
“It’s not just fees that make [orphan trusts] attractive to banks and lawyers,” tax lawyer Jack Siegel told the Times. “These things are just as valuable in building business and burnishing images. The law firm gets the credit for the gift made out of a trust it manages.”