Before we talk about how to choose the right successor Trustee, let’s talk about what a successor Trustee does and whether you need to choose a successor Trustee.
A Trustee is the legal owner of assets held in Trust. When you establish a Revocable Living Trust, you will be the Trustee of your own Trust as long as you are alive and able to take care of your own finances.
At the time of your death or in the event of your incapacity, your “successor” Trustee would step in to take over control of the assets held in your Trust.
This does not mean that the successor Trustee can use the trust assets for himself or herself. The successor Trustee is required to use the assets only for the benefit of the Trust beneficiaries, who are determined by you. If you are living and incapacitated, typically you would be the beneficiary of the Trust. If you are no longer living, the beneficiaries will be the people you name to receive your assets.
The successor Trustee will have control over how the assets are invested, ensuring that tax returns and other filings are handled and will be responsible for making distributions to the beneficiaries.
The number one most important quality when choosing a successor Trustee is, as the name suggests, trust. While the successor Trustee is not supposed to use assets for his or her own benefit, there are no trust police checking on what the successor Trustee does. Therefore, it’s critically important that you trust your successor Trustee to do the right thing. And, it’s not a bad idea to include a system of checks and balances within your estate plan to ensure that your successor Trustee is doing the right thing. We share ideas for checks and balances during our planning sessions with our clients.
Once you have chosen someone you can trust, the next most important factor is that they have common sense, good organizational skills, and a willingness to seek professional guidance. The job of a successor Trustee entails quite a bit of paperwork and compliance requirements in order for the successor Trustee to maintain his or her responsiblities (also know as fiduciary obligations). Bottom line, serving as a successor Trustee can be a thankless job.
The successor Trustee should seek guidance from a team that includes a tax advisor, a legal advisor and a financial advisor. You will want to choose a successor Trustee that will feel confident working with these types of advisors. A successor Trustee that intends to handle taxes and investments without guidance and does not seek the counsel of a lawyer is destined to fail.
Last. but not least, your successor Trustee should be the person that will make financial decisions for your beneficiaries as close to the way that you would. As we like to tell our clients, choose the person or people who would give your kids the same answer you would if your child came to them at age 19 and said, “I don’t want to go to college, I want $50,000 from my Trust so that I can {travel Europe, start a band, start a business, etc}.” Notice, I didn’t say that the successor Trustee would give the “right” answer – just the same answer you would most likely give.
To recap, you are looking for someone you can trust implicitly, has common sense, good organizational skills, is willing to seek guidance from a legal advisor, tax advisor and a financial advisor and will make the same choices for your beneficiaries that you would financially. There is no need to worry if you are still struggling to choose the right successor Trustee, our specialty is guiding families on how to choose a successor Trustee, even in the most difficult circumstances.
