Choosing who should be the successor trustee of a family trust can be a very difficult decision. The successor trustee will be the person who administers the trust assets after you become incapacitated or die. The successor trustee holds, manages, invests the trust assets and collects the income and profits from the investments. The successor trustee will be responsible for paying the expenses of administering the trust and distributing the assets are required in the Trust Agreement. How should you go about choosing the successor trustee of a family trust?
Choosing a proper successor trustee
Generally, when you establish your trust, you are the trustee of a family wealth trust. So, choosing the successor trustee is very important. The individual you choose must be trustworthy, reliable and organized. He or she should be good at following instructions and carrying out the tasks specified in the Trust Agreement. It is also important that the successor be willing to seek professional assistance when it becomes necessary. There are typically three different types of trustees you can consider: an individual, a financial institution, or a licensed professional. Each has its advantages and disadvantages.
Family or friends are common choices for successor trustees
The most popular choice is usually a relative or friend. An individual who is known to you personally, obviously has its benefits. Generally speaking, you will have more trust in that person and you can expect more personal attention from them, both towards you and your beneficiaries. Another benefit might be that this trustee may not charge your estate for their services, which will reduce the overall cost of administering the trust.
The disadvantages may be that a personal friend or family member may not be qualified to handle the responsibilities, or may not be willing or completely available to carry out the tasks. More importantly, if this trustee runs off with the trust funds, or is simply incompetent, there most likely will not be any insurance or bond in place to protect your assets.
Financial institutions can serve as trustees
Another option is choosing a financial institution or a trust company to serve as successor trustee of a family trust. Nearly all major financial institutions have trust departments or associated trust companies that are qualified and very capable of serving as successor trustees of a family trust. Clearly, the knowledge and expertise in managing funds that a financial institution or a trust company possesses is a great benefit. However, this type of trustee typically charges fees for its services and they may take longer to process the administration.
Licensed professional trustees are another option
A licensed professional can also be chosen as a successor trustee of a family trust. One advantage of this type of trustee, as compared to a financial institution or trust company, is that they provide more personal service. One drawback of choosing an individual fiduciary is that he or she may not actually be available to serve at the time needed. Whereas, a financial institution would always be a reliable source of trust administration services.
While settling on a successor trustee may not be an easy decision, it is necessary. You will certainly benefit from understanding your options and obtaining good, sound advice from an estate planning attorney. If you have questions regarding family wealth trusts, or any other trust or estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.