Mirror Mirror on the Wall…Who is the Best Trustee of them All?

July 10, 2019

You have finally reached the pivotal moment in life when you are ready to create your estate plan. Congratulations! Officially you are an adult, with assets, and a strong desire to protect your loved ones. You have probably visited an estate planning attorney or done your own research and decided that a Revocable Trust, also known as a Living Trust, is the right tool to achieve your inheritance goals. There are some important decisions to be made – who will be your beneficiaries, who will serve as guardian to your children, and most importantly, who will be your back-up Trustee.

First, let’s do a quick review of the ever-important estate planning document, the Living Trust. A Living Trust is a primary estate-planning tool that is used in place of a Last Will and Testament. The Trust is created and you, or you and your spouse, are the Trustee(s). Your assets are then transferred into your Trust. By assets, we mean house, life insurance policies, bank accounts, etc. The magic of the Trust only manifests itself after you and your spouse have passed away. Listed below are some benefits that a properly funded Living Trust can provide:

  • Trusts are used to by-pass probate. This means that upon your death, all assets in the Trust pass to the beneficiaries through the Trust, and not through any court process.
  • Trusts can provide your beneficiaries with asset protection. Upon inheriting any monies or assets through a Trust, the beneficiary enjoys financial protection from future creditors, divorces, and bankruptcy.
  • Trusts are fully revocable: the creator can change any terms or completely revoke (cancel) the Trust.
  • Trusts are private documents that unlike Wills do not become a part of the public record.

In order to properly carry out your wishes as stated in your Trust, you need to do some careful soul-searching and select the best successor Trustee(s). This person is the one who shall “step into your shoes” after you pass away and administer the Trust per your directions. It is tempting to name a friend or family member to serve as trustee upon your death or incapacity. After all, who knows you and your family better? But can you think of an individual who is equipped to handle the myriad duties of trusteeship and has the necessary experience to manage your trust? Below are 10 critical questions you should ask yourself prior to selecting your successor Trustee.

  1. Will my trustee communicate regularly with my beneficiaries and act with their best interests in mind?
  2. Will my trustee always live close enough to my hometown and family to effectively manage the day-to-day business of my trust?
  3. Does my trustee have the experience needed to prudently manage the assets in my trust over the long term?
  4. Does my trustee have enough experience to select an accountant experienced in the preparation of tax returns for trusts to help ensure that penalties will be avoided?
  5. Does my trustee have the experience required to manage or sell my real estate?
  6. Will my trustee be competent in gathering my assets, such as my life insurance proceeds, retirement plans, pension, business interests or profit-sharing plan benefits?
  7. Can my trustee provide the necessary investment, accounting and tax services for my trust?
  8. Can I give my trustee broad discretion to distribute the assets from my trust without creating adverse tax consequences for my beneficiaries?
  9. Can my trustee maintain secure, accurate, electronic records of all assets, income disbursements or other activity affecting my trust?
  10. Is my trustee familiar with the formalities required and the fiduciary obligations accepted in administering my trust and is he or she trustworthy?

With the long lazy days of summer upon us, take the opportunity to have an open discussion with your family and potential future Trustees. Contact OC Estate & Elder Law at (954) 251-0332 or info@ocestatelawyers.com to receive a personalized consultation regarding all your estate planning options. We help protect your family as well as your peace of mind.