What to Consider When Selecting a Successor Trustee
By: Barry E. Haimo, Esq.
December 16, 2021
Selecting a successor trustee is no easy task. Too often, well-designed estate strategies fail due to poor execution by those in authority. This is true where managing trusts is concerned as well.
So, what do you need to consider before choosing someone as a successor trustee?
If You Choose a Family Member
Estate planning is a good time to make use of your spouse, children, or a close family friend in fiduciary roles. As a nice bonus, this method is also cheaper than engaging a professional trustee.
The decisions of the trustee should be made in the beneficiaries’ best interests. The most compelling reason for naming a friend or family member as fiduciary is that they may be better equipped to know the beneficiaries’ best interests.
Before hiring a fiduciary, keep in mind the following:
- It is the trustee’s job to manage the assets and distribute the proceeds of your trust. Lack of knowledge or negligence can lead to various complications. Investment managers, accountants, and attorneys are frequently necessary — or at least someone with that kind of specialized knowledge.
- Making potentially contentious decisions is tough for anyone, particularly a family member. Bereavement can quickly disrupt family harmony. This can worry a family trustee and put them in an awkward position.
Bottom line? Choosing a family member as trustee has several benefits, but this role requires good communication. Make sure your trustee is competent to the task ahead of time and understands what the job entails and the time involved.
Also be aware that some may decline if they do not feel they are up to the task. Be respectful of their decision and move on to the next person on your list. This is not a job for just anyone.
If You Go the Professional Trustee Route
Historically, it was typical to name the local bank’s trust department as trustee. The trust and estate administrators were mostly family friends. However, bank mergers have resulted in long-distance bureaucracy and committees making decisions about families they will never meet.
Corporate fiduciaries retain important benefits, though. Corporate trustees employ professionals that are knowledgeable about the law to assist with trust interpretation, management, and distribution. Plus, if there is fiction in the family, a corporate trustee can easily remain neutral.
State and federal regulations apply, as well as annual independent audits. Corporate trustees must also be insured against fraud, theft, misconduct, and mistakes. And a corporate trustee won’t die or get sick.
Due to all of these things, choosing a corporate trustee over a part-time volunteer has many advantages.
The Best of Both?
Choosing between “Friends and Family” and “The Professional Route” is all about peace of mind.
A trust should be created by an experienced and knowledgeable estate planning attorney with particular knowledge of the laws in your state. However, trustworthy family members or friends can be potentially more efficient and attentive as trustees than professionals who are likely overseeing numerous trusts and only view this as a job.
In other words, both strategies offer potential, but also risks. Often, a trusted person can function well as trustee provided they make use of knowledgeable legal and tax counsel.
Both professional and individual trustees are often included in wills and trusts nowadays. For example, the individual may handle family problems, while the professional handles daily tasks like investing, taxation, and accounting. This strategy may succeed if you have a competent person and professional trustees who can work together to accomplish your trust goals and communicate effectively with your beneficiaries.
Choosing the Right Trustee
At Haimo Law, we help guide you to choosing the right trustee for your situation and goals. Whether that is a family member, a corporation or a combination. Our goal is to avoid chaos, conflict, court and costs.
This can be a stressful task for many people, but it does not have to be one you tackle alone. We can help you achieve your estate planning goals and ensure you feel accomplished and confident.
Leaving a legacy you can be proud of is easier than you think with our 4-step unique proven process. Protect your family, assets, and business, and gain the peace of mind of knowing you’re prepared and in control by calling us today at 954-228-3369.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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