One of the toughest decisions for a client to make when preparing their estate plan is naming a trustee who is reliable and trust worthy. This person or entity will be responsible for the administration of the trust and its assets, either during the client’s life, or after the client passes. Their responsibilities can include making financial decisions such as acquiring assets and investing funds, to ultimately distributing inheritances according to the client’s wishes. Below are some considerations clients should think about when making this decision, and some suggestions on how to deal with the issues.
Naming a Trustee
Will the trustee always be available to act in their role or make decisions?
Whether choosing a spouse, child, or sibling, a lot of the time these individuals have their own lives they need to worry about as well. In some of these situations, if those individuals are not ideal, a corporate trustee may be a good option for the client, as they will always be available. However, corporate trustee fees can get expensive and might not make economical sense in some situations.
What happens if my trustee passes away or becomes incapacitated?
Clients should always have an alternate person, or successor trustees. The trust document should always have provisions addressing this issue. Again, a corporate trustee should be considered as they never pass away or become incapacitated.
Does my trustee have a good relationship with all of my beneficiaries?
Appointing a person who has conflicts or issues with any of the beneficiaries may present situations where that beneficiary may want to challenge the appointment or be constantly looking for reasons to remove the person from the office of trustee. Better to think ahead and make matters clear, than have trust assets eaten up by having to defend litigation.
Does my trustee have any experience or special qualifications that make them ideal for the role?
Lawyers and CPA’s would be extremely qualified appointees if willing to accept the appointment and provide the necessary services. Always consult with the relevant professional to determine what the fees would be.
Is my trustee financially responsible?
There are thousands of cases in which trustee’s have misappropriated and stolen funds for their own personal use or gain. Appointing someone that has a bankruptcy in their past, no matter their relationship, is not the wisest decision.
No matter who the clients choose, the trustee should always surround themselves with a good team to make all the decisions. Sound legal and financial advice goes a long way in administering and executing the client’s wishes as desired. Trustees should always seek the advice of a CPA, Financial Advisor, and a competent estate planning attorney to assist them with the responsibilities of the position they hold.