Picking a Successor Trustee for Your Revocable Living Trust
Estate planning is more than just deciding where your assets should go after you pass away; it’s also about ensuring that your estate is managed competently and according to your wishes. A revocable living trust is a powerful tool in estate planning that directs the management of your assets during your life if you become incapacitated, in addition to after your death. However, you need a representative to carry out your directions, and choosing the right trustee is paramount. For most revocable living trusts, you are your own trustee for as long as you are able, but you need to nominate successors. The trustee role carries significant responsibilities, and the decision should not be taken lightly. Here are some key considerations when nominating a successor trustee for your revocable living trust.
Understanding the Role
Firstly, understand the role of a successor trustee. They will manage your trust’s assets if you’re unable to do so, either due to incapacity or death. Their duties include paying bills, managing investments, and eventually, distributing assets to your beneficiaries according to the terms you’ve set in your trust, whether all at once or over an extended period. Your attorney would help you prepare the terms that governed the trustee.
Trustworthiness and Impartiality
The most critical quality in a successor trustee is trustworthiness. They must manage your estate with integrity and in the best interests of the beneficiaries. Impartiality is also vital, especially if the trustee will manage assets for multiple beneficiaries who may have conflicting interests. In many cases, the trustee is also one of the beneficiaries, making their ability to put the estate’s interests above their own essential.
While the successor trustee does not need to be a financial expert, a solid understanding of financial matters is beneficial. Even in straightforward estates, they need to be able to balance a checkbook, keep good records, and follow directions closely. If they lack experience, they must be willing to consult with attorneys and accountants to manage the trust assets effectively. If the individual has trouble keeping up with their own personal financial affairs, it’s doubtful they’d be able to manage yours effectively.
Availability and Willingness
The person you choose should be willing and able to take on the responsibilities of the role. It’s a time-consuming task, and they should be prepared for the long-term commitment it requires. On a different but related subject, you will want to ensure that the trustee is adequately compensated for the role. Many good trustee candidates are busy professionals, and you can’t reasonably expect them to sacrifice their living unless they are compensated for their efforts in carrying out your estate.
Proximity and Familiarity with the Estate
Ideally, the successor trustee should be someone who lives nearby and is familiar with your estate and your wishes. In fact, for estate plans we prepare, we prefer to meet with both you and your first nominated successor so that they can get familiar and comfortable with their role. This is designed to make the management of the trust more efficient. Of course, with modern communication tools, living nearby is not essential, but if your estate involves real estate and personal property, it’s likely they’ll have to come to the location to handle some of that business.
Health and Age
Consider the age and health of potential trustees. If you are older, choosing someone of your generation may not be wise if you want them to manage the trust in the event of your incapacity or death. It may be prudent to select a younger individual who is more likely to outlive you and be capable of managing the trust when needed. In any case, however, we suggest nominating enough backups to cover the possibility that your first nominated successor is not around to do the job.
Willingness to Seek Assistance
While you want to nominate someone with at least a baseline competency in managing financial resources, a suitable successor trustee is also someone who acknowledges their limitations and is willing to seek professional help when necessary, whether it’s for tax matters, legal issues, or investment advice.
Backup Successor Trustees
Always nominate backup successor trustees. Life is unpredictable, and if your first choice is unable to serve, having a second or even third option can save your estate from costly delays and legal proceedings to appoint a new trustee.
Lastly, consult with an estate planning attorney to ensure that the nomination of your successor trustee aligns with the rest of your estate plan. There are many misunderstandings about what a “trustee” is and how a trustee obtains fiduciary custody of your assets. There are a number of moving parts that have to be coordinated, and you will want to invest in an estate planning lawyer that does more than just prepares documents.
How Many Trustees?
When choosing a trustee, you can select one trustee (and successors), or you can select multiple co-trustees who serve together. In my experience, the ideal situation is where you have a single trustee who is serious about doing their job the right way, and they hire the necessary advisors to help them meet their duties. However, I’ve seen clients choose self-interested or unmotivated individual trustees who turn out to be a problem. Fear of the latter problem causes some people to choose co-trustees, but the problem there is that conflicts in personality between the two trustees can create deadlock. Therefore, before choosing co-trustees, it’s advisable to consider how well the co-trustees will work together.
What if You Don’t Have a Good Candidate in Mind?
Sometimes you might prefer an attorney, CPA, or corporate trustee to act as your trustee rather than an individual within your personal circle. While there will certainly be professional fees involved, the professional costs may create economic benefits to your beneficiaries that would be much better than resources poorly managed by an ill-equipped trustee. Also, in some cases with intrafamily conflict, it’s better to have someone completely independent, assuming they know what they’re doing.
Selecting a successor trustee is a decision that can have lasting repercussions on your estate and your beneficiaries. Consider these factors carefully and make a choice that will honor your legacy and protect the interests of those you care about the most. At Bryant & O’Connor Law Firm, we understand the intricacies involved in this process and are here to offer guidance and support. Contact us to discuss your estate planning needs and ensure that your trust is in good hands.
As always, this article is not legal advice, and consideration of how to arrange your estate plan is something you will need to discuss with a lawyer with whom you can personally discuss your situation and concerns.