When you establish a revocable living trust, you typically appoint yourself as the initial trustee; in other words, you choose yourself to manage your own assets. You also choose a person or entity to succeed you as trustee, should you become incapacitated or die. Choosing who should be the successor trustee of your revocable living trust is an important decision. The most important things to consider are the qualities needed in a good trustee. Any trustee, whether the initial trustee or a successor, will inevitably be the person who has complete authority to manage and invest the assets you have placed in trust. The trustee is also responsible for administering the trust and properly distributing the assets. A successor trustee of revocable trust is responsible for the same tasks as the initial trustee. That person should be as trustworthy and competent as your initial choice.
Choosing the right successor
Deciding who your successor should be, in the event you are no longer able to carry out your obligations, is an important decision. The person you select must not only be trustworthy, but also organized and reliable. Your successor trustee should be an individual you are confident will follow your instructions, as stated in the terms of your Trust Agreement.
It is also a good idea to choose a successor whom you believe will be willing to accept professional assistance, if ever required. There are different types of trustees available to choose from. A trustee can be an individual, a financial institution, or even a licensed professional, such as an accountant. Each type of trustee has its own advantages and disadvantages.
Relatives and friends are common choices
The majority of clients designate a relative or close friend to be the successor trustee. There is an obvious advantage to choosing someone with whom you are personally familiar. You are more likely to trust that person and be assured that your estate or affairs will receive their personal attention. A financial institution would be more impersonal, as it is responsible for managing many trusts at a time. Another advantage to choosing family and friends is that they are less likely to charge a fee for their service as trustee, which can reduce the cost of administering the trust.
Disadvantages to choosing family and friends
Designating family or friends is not the best choice in every situation. Although they may be trustworthy, they may not be very qualified to handle the responsibilities of a trustee, especially if you have a complex estate. A professional trustee or a financial institution may be a better choice, depending on the nature of your estate. Another less obvious disadvantage is the fact that, selecting an individual, such as a relative or friend does not provide you with any protection. For instance, if your relative or friend decides to run off with your money, or is simply incompetent, you may have little recourse, because your trust agreement typically waives the requirement of a bond. On the other hand, a financial institution or professional trustee will typically operate under a bond or insurance coverage to protect your assets.
Financial institutions as trustees
Selecting a financial institution as a successor trustee is a common choice, as well. Most major financial institutions also have trust companies that are certainly qualified and very proficient in serving as a successor trustee of a living trust. The knowledge and expertise of a financial institution, gained from managing funds as a normal course of business, is an obvious benefit. The downside, however, is that financial institutions typically take longer and will charge a fee for their services. These fees, however, are typically reasonable when the services rendered are considered.
Licensed professional trustees
In addition to expertise, an advantage of selecting a licensed professional as a successor trustee is that the time taken to administer the estate is generally less than most financial institutions or trust companies. Your estate planning attorney can discuss your options with you and help you decide which type of trustee will best fit your needs.
If you have questions regarding successor trustees, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
