One of the biggest sticking points in creating a revocable living trust is often selecting a successor trustee.
Let’s look at what can go wrong and how you can protect your estate.
Duties Of The Successor Trustee
The grantor (person who creates the trust) must name a successor trustee—the person who will take charge of the trust when the grantor dies. When the grantor dies, the successor trustee is in charge of determining the value of the trust and distributing assets to named beneficiaries.
If there are unclear provisions in the trust, the trustee is required by law, as a fiduciary, to use good judgment and put the interest of the beneficiaries ahead of the trustee’s own interests.
A trustee needs to be able to understand what their role is and know when they need the help of an estate planning attorney. Some trusts are complicated and tax reporting is rarely simple. The trustee may need to create a team of professionals, including an estate planning attorney, a CPA and a financial advisor.
How To Choose Your Successor Trustee
When considering who to name as a successor trustee, you have many options. You’ll want to name a reliable, responsible and organized person, who will be able to manage finances, tax reporting and respects the law. Someone who thinks they can manage an estate on their own with zero experience in the law or finance may be headed for trouble.
The decision is not always an easy one. A child or other family member is often the first choice, but is that the best choice?
Just because your first born adult child wants to be in charge doesn’t mean they are the best candidate.
The child who lives closest to you may be excellent at caregiving, but not adept at handling finances.
The child who lives furthest away may be skilled at handling money, but will they be able to manage their tasks long distance?
If there are no family members or trusted friends who can serve in this role, it may be best to consider a professional fiduciary to serve as a successor trustee. An estate planning attorney may also serve as a successor trustee.
The next option is a financial institution or trust company. Some banks have trust departments and take on this role, but they often have steep minimums and will only work with estates with significant value. Fees are also likely to be higher than for a professional fiduciary or other professional. Be sure to inquire how they evaluate your needs and ensure quality of care, if you become incapacitated. What processes are in place to protect grantors?
Another alternative is to identify a nonprofit with a pooled trust that accepts trustee responsibilities for individuals with special needs and for others who would prefer to have a nonprofit in this role.
Your estate planning attorney will be able to help you identify the best candidate for this role, as you work through the creation of the trust. Don’t be shy about asking for help with this important matter.
