To be certain that their wishes are followed during lifetime and after their death, many people create a trust to hold most of their assets. One of the tasks in the process of creating (or updating) a trust is to designate the person who can best carry out your plans when you can no longer act due to death or incapacity. That person is referred to as the successor trustee.
Kiplinger’s article, “How to Choose the Right Trustee for Your Estate,” explains that being a trustee means accepting specific duties and obligations. For example, showing impartiality between the interests of the current and future beneficiaries, accurately accounting to all beneficiaries, wisely investing trust funds, managing trust property and adhering to the prohibition against self-dealing.
It’s important to understand the strengths and weaknesses of your successor trustee(s) and plan accordingly. Furthermore, it’s important that the successor trustee appreciates the significance of their responsibilities and is comfortable with the risk of liability to the trust beneficiaries. When considering a successor trustee, ask yourself these questions:
Can your trustee separate his or her personal feelings and interests from those of the beneficiaries and exercise sound judgment?
Will your trustee treat all the beneficiaries impartially?
Is your trustee financially savvy enough to analyze investments and/or work with professional advisors?
Will a child who is balancing a family and career have enough time to devote to serving as trustee? Should co-trustees be appointed so that responsibilities may be delegated among two or more persons?
It’s generally safe to say that family members are closer to the beneficiaries and are therefore more likely to understand their needs. A family member trustee may charge his or her costs to the trust and may or may not charge an administrative fee.
Their are downsides to family member trustees in some cases. When one sibling is selected over another as trustee, it can trigger various feelings and resentments among the beneficiaries. A relative without any trust experience may run into trouble, because of his or her ignorance. Fortunately, your trustee can work with a lawyer and other professionals to assist them in the fulfillment of their duties.
You can also select a corporate or individual licensed professional as the successor trustee. For example, banks and trust companies provide professional fiduciary services and act independently. There are also individual professional fiduciaries are licensed and regulated by the State of California, and some feel that such individuals provide a more personal relationship than a bank trust department. In either case, opting for a corporate or individual professional fiduciary may eliminate some of the potential for family conflict, while also providing experienced and professional investment and administrative management.
Think about these questions as they relate to a corporate or individual professional trustee:
Will they invest the time to understand the unique dynamics of your family and the goals of your trust? How?
If you're considering an individual professional fiduciary, what experience does the person have as a trustee? Do they have experience handling assets similar to yours? What is their succession plan if they retire or pass away?
If you're considering a corporate trustee, what are the corporate trustee’s standards? Will they accept a trust estate of your size?
What are the associated fees?
Although there is a growing a place for professional and corporate trustees, most people still wind up choosing a family member or friend as their successor trustee. If you decide to go with a family member or friend, be sure and also choose an alternate successor trustee (i.e. backup) in case something happens to your primary successor trustee. Professional and corporate fiduciaries can also be good choices as alternate successor trustees. Finally, you can choose to provide any trustee with a power to appoint a successor trustee or co-trustee of their choosing, which can build some flexibility into the trusteeship.
Many of the answers to these questions will depend on the size and the nature of your trust. Talk to a trust attorney about the best approach for your family.
Reference: Kiplinger How to Choose the Right Trustee for Your Estate”
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