Although my clients have heard this from me on more than one occasion, it bears repeating: the most important decision you make in drafting your trust is who will serve as the Successor Trustee. Now this great advice is seconded by Rick Friedman, senior vice president and financial advisor at RBC Wealth Management.
Forbes recently had a nice article titled “How To Choose The Right Trustee For Your Estate,” in which the role of a trustee is explored.
A trustee is the individual or company that administers a trust for the benefit of named beneficiaries. Duties can range widely and may include paying bills and taxes, and managing property and investments. Most importantly, the article says a trustee “has a legal fiduciary duty to manage a trust on a beneficiary’s behalf,” by always acting in the beneficiary’s best interests, as outlined by the trust.
The trustee’s job isn’t easy nor quick. Overseeing a trust could mean years of active engagement with the estate’s beneficiaries. For this reason, the article emphasizes that it’s essential to think about the most appropriate trustee before making the appointment.
A trustee doesn’t need a lot of legal or financial knowledge, but needs to be someone you trust implicitly. In addition, close proximity to the beneficiaries is important so that duties can be performed quickly and without undue travel expense. Above all, it should be someone who has the energy and mental acuity to take on all responsibilities.
Managing a trust is a big responsibility and requires a candid conversation with the potential trustee. A trustee needs to know up front what is being asked of him or her. The article also emphasizes the importance of periodically re-evaluating your trustee choice as circumstances can change. Have you and this friend grown apart or now is your parent is too old to help? If yes, it’s time to consider a new trustee.
Another option is a trust company. A trust company will be unemotional and completely detached from the situation. “There are definitely fewer family feuds when trust companies are involved,” the article says. Trust companies can also bring expertise and experience that a non-professional trustee can rarely match. The potential downside to hiring a company is that trust companies charge a fee. This can vary, but is usually a percentage of the estate. A friend or family trustee will usually not charge for their services.
Finally, the article emphasizes the importance of having language in your will that allows you to assign new trustees if circumstances change. To do this you will need flexibility in your trust language.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. However, proper estate planning is not a do-it-yourself project. Why not call us for a complimentary consultation at 757-259-0707.
Reference: Forbes (May 19, 2015) “How To Choose The Right Trustee For Your Estate”