Many people create a Trust as part of their estate plan. A Trust can be used to avoid probate, reduce estate taxes, manage assets for beneficiaries and provide creditor protection for an inheritance. A key element of a Trust is the Trustee. The Trustee is the person charged with carrying out the Trust maker’s instructions — “this is the big job.” Choosing the right Trustee is a key element to ensuring the estate plan you create will achieve your goals. So how do you choose the right person to serve as Trustee? Here are five questions to ask yourself about the person you are considering.
1. Does this person have the right qualities to serve as Trustee? Many people are inclined to choose an adult child to serve as Trustee based on birth order, gender, or geographical location. These are generally not good criteria for selecting a fiduciary. The position of Trustee carries with it serious responsibilities. The person you choose should be trustworthy, well organized, possess excellent communication skills, and be fiscally responsible.
2. Does this person have the time to devote to the responsibilities of serving as Trustee? When someone passes away there are many tasks that need attention. These include:
– paying debts and expenses
– filing income tax returns
– working with the lawyer, the accountant and the financial advisor
– selling real estate
Even though your Trustee has the authority to hire people to help him or her, ultimately your Trustee is the person responsible for making sure things are done properly and timely. Ask yourself if the person you are considering has the time to devote to the job.
3. What is the relationship between your prospective Trustee and your beneficiaries? The person who serves as Trustee following the death of the Trust maker will need to deal with your beneficiaries on a regular basis. A Trustee should be even-tempered, impartial, and have the diplomatic skills to successfully manage disputes that may arise. If your children do not get along well, naming a child to serve as Trustee is a recipe for disaster; naming two children as co-Trustees who do not get along is even worse.
4. Does the person you are considering have the skills to serve as Trustee? When naming a Trustee, consider the tasks that your Trustee will be required to perform based on the size of your estate, the types of assets you own and the terms of your Trust. For example, if you own a business or rental real estate, your Trustee will be responsible for managing these assets following your passing until the assets can be sold or distributed. Does your Trustee understand your business, or is your Trustee experienced in managing rental property? Is your Trustee savvy enough to negotiate contracts or select capable advisors to assist? Is the Trustee able to keep accurate records? If your Trust will continue for the benefit of your beneficiaries for some period of time (for example, until your children reach a certain age), does the person you are considering have the financial wherewithal to manage the Trust assets for a long period of time? This is not to say that the person you appoint as Trustee needs to be a financial wizard, but he or she should be demonstrably fiscally responsible. .
5. Should you choose a professional Trustee? If your family members do not get along, if your children are too busy to devote the time that will be needed, or if you do not have a family member who is well-suited to serve as Trustee, consider naming a professional Trustee. A professional Trustee is typically a bank, trust company, lawyer, or accountant. Some of the advantages to using a professional fiduciary are:
– experienced in estate settlement and trust administration
– carries insurance to make the estate or trust whole in the event of malfeasance
– does not have a personal stake in the situation
One of the reasons clients shy away from appointing a professional Trustee is because they know there will be a Trustee’s fee. Keep in mind that anyone who serves as Trustee, including a family member, is entitled to be compensated. In situations where the appointed Trustee is not suited to the position, the cost of poor or negligent administration of the Trust, and often the litigation that results, usually far outweighs the amount that would have been charged by a professional to do the job right.
The person who serves as Trustee is often the key to the success of an estate plan, so choose wisely. An experienced estate planning attorney can help you make the best decision based on your particular family situation, assets, and distribution plan.
Suzanne R. Sayward, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham.. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
© 2017 Samuel, Sayward & Baler LLC