Choosing the Right Trustee
Putting together an estate plan can be quite complicated, especially if a person owns a number of different assets and/or has many heirs/beneficiaries. One common feature of more complex estate plans involves the creation of trusts to achieve goals related to maintaining privacy, avoiding the costs of probate, tax planning, deferred distributions, provisions for minors or disabled beneficiaries, and wealth preservation (a basic will and revocable trust being the standard estate plan for many people). With any trust, one of the key decisions, outside of when and how to fund it, is the person or entity to name as trustee. A trustee is given a position of trust that includes a large amount of power and authority to make decisions about the investment and distribution of trust assets. Depending on the structure of the trust, this person would take control when the creator becomes incapacitated or upon his/her death. Choosing the right trustee is one of the most pivotal decisions will make when formulating an estate, and choosing the wrong person can have disastrous results for the trust creator and his/her beneficiaries. As an example of how heated conflict can become over the management of a trust, former astronaut Buzz Aldrin is suing two of his children and former manager for mismanagement of his trust foundation. Trust litigation costs the estate a lot of money and may not accomplish the results desired. Choosing a competent and trustworthy trustee from the beginning is the most effective method of protecting the integrity of a trust, and a discussion of considerations to use when making this decision, will follow below.
Issues that Can Spark Problems
When putting together an estate plan, deciding who will serve as a personal representative and trustee often comes down to birth order of children or which one lives closest to the parent, and not whether this person has the most financial experience or a firm grasp on the parent’s wishes. Once a trustee takes over active management of the trust, he/she has a lot of ongoing responsibilities that must be fulfilled, including:
- Notifying heirs of material changes in the trust and distribution of trust funds;
- Inventorying assets and debts;
- Managing investments;
- Evaluating estate tax liability;
- Deciding when and how to sell real estate; and
- Keeping beneficiaries informed about trust development.
Most commonly, disputes arise because of the amount of an inheritance or financial condition of the trust, which usually is accompanied by an accusation the trustee breached his/her duty of good faith and failed to act in the best interests of the beneficiaries. This situation is not good for anyone, and if the trustee is a family member, could damage the relationship permanently. Instead, putting the proper amount of thought and looking at key factors can help to identify a potential trustee that can serve in this role with minimal risk of problems.
Factors When Choosing a Trustee
Given the amount of authority a trustee holds over financial matters, picking the right one is crucial to the long-term health of the trust and protection of the beneficiaries’ interests. Some factors that should go into this analysis include:
- Does the person know the trust creator’s wishes about how assets should be managed, invested, and distributed?
- Does the trust creator have trust and confidence in the person?
- Would it better to name more than one trustee, especially if two qualified individuals have complementary strengths. However, these individuals would have to be able to work together.
- Would a professional/corporate trustee be a better choice, e., no one is available, willing, or responsible enough. However, while a corporate trustee will have significant financial knowledge, the downsides are the fees can be quite high and the institution will not understand the dynamics of a particular family.
Get Legal Advice
Planning your estate is one of the most important decisions you will ever make. Working with an experienced estate planning attorney can ensure your family will receive the full benefit of your lifetime of hard work. William Rambaum has decades of experience helping Floridians establish and manage their estate plans. Contact the Oldsmar office today to schedule an appointment.