When clients walk into the office to do estate planning, they think they are all prepared. They know exactly who and how they want to leave their assets. In fact, they may have that down to too fine a detail. (I’ll blog about that next week). However, many people struggle with the decision of whom to leave in charge of decision-making, once they are out of the picture.
Sure, if they are married, they’ll typically choose their spouse. But, who should serve after that?
his is a difficult choice which depends on the circumstances. Of course, one should pick someone who is up to the task. The fact that the individual is the oldest child, etc., does not automatically qualify them. They need to possess the skills needed to administer the trust. They need to be organized and be willing to delegate those tasks which they cannot do themselves.
The chosen person must be able to work with a mix of people. Especially, they must be able to work with the beneficiaries of the trust. This does not mean they will let the beneficiary get their own way. But, the trustee needs to be able to explain clearly what their decision is and why it was made. There are countless cases in which conflict between the trustee and current or remainder beneficiaries winds up in litigation. This risk is especially high when there are blended families involved.
Perhaps most of all, the trustee should have integrity. They need to be trustworthy. There are countless stories in the news of trustees who are accused of inappropriately using trust assets for their own benefit.
So, what is the solution? As I said, each situation is different. A combination of multiple trustees might be a workable solution in one situation. In a blended family situation, maybe you have the grantor’s sibling, spouse, and child serving together as trustees, after the grantor’s death. In another situation, the relationships may be so irretrievably broken that a corporate trustee may be the only workable solution. While corporate trustees typically cost 1% of assets annually, they are often seen as impartial bystanders. In a situation in which there are many conflicts, a corporate trustee might be a real bargain due to their potential ability to avoid litigation.
A trust works best only when the right trustee is in place. Make sure your clients give thought to this decision as it may be the most important one they make regarding their estate plan.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com
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