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Estate Planning Considerations – Selecting a Successor Trustee

Do you have a trust? Are you thinking about creating one? Why?

Most people will tell you they created or want to create a trust to protect their assets and to make sure they are taking care of their children/grandchildren.  So, it makes sense that (1) who takes care of the children and (2) who takes care of the stuff, are two of the more important decisions clients will make while designing their trust. I’ve previously posted tips on selecting a guardian, but, what about those trustees?

Who are the potential candidates and what will they do?

In the trustee world, there are two primary options, an individual or a corporate trustee (more to follow). The successor trustee will likely be responsible for paying your final bills, filing your final tax return, accounting for your assets, and selling/distributing your assets according to the rules you’ve laid out in your trust.

Should I use a corporate or individual trustee? In practice, many of my customers will lean towards individuals as their initial successor trustees; although it is not uncommon for me to advise they use a corporate trustee as a co-trustee or at least as a secondary back-up. Some ideas we discuss while making these decisions are:

  1. What assets are held in the trust? Cash, stocks, bonds, retirement plans, real estate, etc.
  2. How much is the estate worth? Total value or potential value if managed properly.
  3. How complex is the trust? Is there a potential beneficiary with special needs?
  4. Personalities of the candidates? Do they have the backbone to say “no” to your heirs?
  5. Experience and availability of the candidates? Do your successor trustee(s) have financial experience, are they experienced in managing accounts, do they have the time to dedicate to such a task?
  6. Is the candidate willing to serve as trustee? In most cases, being a trustee is a fiduciary role, meaning the successor trustee will inherit not only the workload, but also a legal liability to manage that workload properly. Are they up to the task?
  7. Fees?
    1. Most corporate trustees have set schedules for their fees. For example, 1.25% on the yearly upkeep of the trust. Keep in mind, corporate trustees may have financial advisors, accountants, and other professionals on staff that assist the management of the trust (which may or may not be included in the total fee).
    2. Individuals rarely have scheduled fees, however, they are often afforded a “reasonable fee” per the trust documents, in other words “what the corporate trustees are charging in this area.” Individual trustees may need to hire other individuals to help with more complex matters and these fees would likely be in addition to the trustees fees.

Selecting successor trustees is no simple decision, but taking time to think through these questions and by working with your legal advisor, I am confident you can make sound decisions when it comes to your successor trustees.

Contact us if we can help.

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