06/22/2023
TRUSTEE AND SUCCESSOR TRUSTEE
Your daughter, brother, friend, or neighbor may be perfectly capable of serving as your successor trustee, but there are many reasons they may not be the best choice. Let’s go back a step before I share why individuals you know and trust may not be ideal for this vital role.
An important part of estate planning involves creating legal documents to manage your assets during your lifetime and after your death. The person(s) creating the trust are called the trustors. It is important to carefully consider who will become the trustee of the trust after they are no longer able, and these individuals or professionals are called their successor trustees. Many people choose to appoint a family member for this role. While sometimes this works well, it is important to know that there are several advantages to naming a professional trustee to manage your trust when you’re gone.
AVOID BURDENING THOSE YOU LOVE
Acting as a successor trustee is not rocket science, but it is a completely different set of tasks than most people have had to do before. Wrapping up someone’s estate when they’re gone takes many hours of work carrying out duties they’re unfamiliar with. Not to mention that most people you might name are already quite busy with their own lives and maybe even children. Professional trustees wrap up living trusts around three to five times faster than adult children or other individuals, and with much less stress for loved ones.
AVOID CONFLICT WHEN EMOTION ARRIVES, HAVE PROFESSIONAL TRUSTEE WITH AN OBJECTIVE VIEW
Even in families that get along extremely well, the stress and pressure of wrapping up your trust can cause tension in relationships. All it takes is one decision that siblings don’t agree with to cause a rift in a previously happy family relationship, all when you’re no longer here to help mend it.
CASES WHEN A BENEFICIARY CANNOT ALSO BE A TRUSTEE
The most obvious case where a professional trustee works best is in the case of minor children or adult children who aren’t quite ready to receive a larger check all at once. Children under 21 do not have the experience and capacity to manage estate assets. A professional trustee could manage a trust for minor children until they become of age. Another example of a situation where a professional trustee is a good idea is a special needs trust. Beneficiaries with developmental disabilities, for example, might not have the capacity to manage complex finances. In this case, a professional trustee ensures that trust assets will support vulnerable loved ones for years to come.
EXPERIENCE WITH TRUSTS, TAXES, REAL ESTATE, FINANCIAL ADVISING. IS YOUR BROTHER READY TO BE A TRUSTEE?
Many revocable living trusts last only long enough to close out the original trustee’s estate. However, this often involves many months and significant paperwork. This will require at least filing one set of taxes for the deceased. Each year, trustees review investments, keep up real estate and file taxes. For generational trusts, the responsibility could go on for much longer. Why shoulder your children with the burden of managing the trust assets when you can hire someone to do it for them?
PROFESSIONAL TRUSTEE PROVIDES LEGAL PROTECTION
In addition to providing expertise, objectivity, and continuity, a professional trustee can also help manage risk associated with the trust’s management. Professional trustees are held to exacting standards of care and are required to carry insurance to protect the trust’s assets. This provides protection for the trustors and beneficiaries. A professional trustee protects against legal or financial liabilities. They also help to identify and manage potential risks associated with the trust’s assets. A professional trustee will be on the lookout for investment risks or tax liabilities. While there could be additional costs associated with hiring a professional trustee, the benefits often outweigh those costs. This is especially true for trusts with complex assets or beneficiaries.
In conclusion, appointing a professional trustee can provide significant benefits to providing for your loved ones. By choosing a professional trustee, you can benefit from their expertise, objectivity, continuity, and risk management skills. This can help to ensure that your assets are managed effectively during your lifetime and distributed according to your wishes after your death, to your family who still love each other.
