Living Trusts and Trustees: What You Need to Know

10.18.17For living trusts, the person or people who set them up are usually named the initial trustees, but after that, there needs to be a successor trustee. Think carefully about who you would want to take on these responsibilities.

When the first spouse dies, the surviving spouse usually becomes the sole trustee, according to the article, “Women on Money and Mindset: Estate planning: choosing a trustee,” in The (Riverside CA) Press-Enterprise. When the second spouse dies, the trust passes to a successor trustee or trustees. Most people name an adult child, trusted friend or a family member who they trust. You can also name a bank or a professional fiduciary.

Children: Married couples often will name their oldest child as the successor trustee or they name all their children to act as co-trustees. This can work if there’s never been a divorce; there is only one child; she lives close; she doesn’t work and all the assets are investment accounts.  However, most adult children will have full-time jobs. Adding the job of trustee can be a strain because it’s time-consuming and technical. The administrative burden of taking care of your final business can be overwhelming.

Friends: Acting as trustee is a big large favor to ask.  Therefore, if you’re going to ask a non-family member, set up a provision in your trust to pay them reasonable trustee fees.

Professional fiduciary: A professional acts as a trustee,  which they do on a regular basis. They know what to do and are required by law to have the best interests of the beneficiaries of the trust as their top priority.

Banks: Banks like to act as trustees, especially if a big part of your trust is held in financial assets managed by that bank. They will charge higher fees than professional fiduciaries, and they’ll have some rigid internal rules to follow. If your beneficiaries may fight, or if they’re all out of state, a financial institution or a professional fiduciary is a wise choice.

The successor trustees named in your document should be notified and given a copy of your trust document. These successor trustees can always say no, so carefully consider naming the next in line.

If you fail to name more than one person, and he or she can’t or won’t serve, your trust may have a court-appointed trustee.

As with all estate planning matters, include your children and significant family members in discussions. Tell the individuals you want to serve as trustees what their responsibilities will and be sure they are willing to take on these tasks. Have them meet with your estate planning attorney. This will make things less stressful, when they need to step into this role.

Reference: The (Riverside CA) Press-Enterprise (September 2, 2017) “Women on Money and Mindset: Estate planning: choosing a trustee”

For additional information on trusts and trustees, please visit our website or attend one of our workshops.

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