Naming a trustee is a big sticking point for many, as they go about putting their estate plan in place. It’s often easier to determine what sort of trust will be needed and who the beneficiaries are. When it comes to selecting a trustee, it gets sticky. The skills of the trustee can make the difference between an estate plan that works, and one that becomes embroiled in problems that can take years to resolve. In a recent post, “How to Find the Right Estate Trustee,” The Motley Fool takes a closer look at the factors to consider when naming a trustee.
Fiduciaries. A fiduciary is an individual with a legal and moral obligation to put the clients' interests first. A new fiduciary rule requires that all advisors who work with retirement plans or provide retirement planning advice to consider themselves fiduciaries. However, some financial advisors may or may not act as fiduciaries. If they commit to being a fiduciary and have the necessary knowledge and experience to be a good trustee, any type of financial advisor can do the job.
Qualifications. A trustee may need to make critical decisions about how to manage the assets in your trust. He or she must possess the right background to make informed decisions. Estate trustees should have training in investing and taxes and possibly business management experience, if you are a business owner. If you want to name family members that you trust implicitly, but may be lacking in one of these areas, you may encourage or require them to hire trusted professionals to assist them in a non-fiduciary capacity.
Diplomacy. A trustee takes control in a stressful family situation, so he or she must be sensitive and get along with your beneficiaries. When considering potential trustees, look at their interpersonal skills in addition to their business and financial skills. You might also get your beneficiaries together with the potential trustee to see if they get along. In our office, we encourage all clients to have a Family Care Meeting to head off any issues ahead of time.
On the Younger Side. Let’s be candid. You need to pick a qualified trustee who’s likely to be around after you're gone. That means they should be people who are significantly younger than you are and in good health. You should also name a "successor trustee" who will assume control, if the first trustee is no longer available. You can also designate a law firm or financial firm as your trustee, but an institutional trustee will be more expensive than individual trustees. They often set their fees at 1% of the value of the estate. An institutional trustee may also be confined by its internal company policies and not your wishes.
Update on a Regular Basis. In the same way that estate plans need to be reviewed regularly, you also want to review your choice of trustee. Over time, your perfect pick may have been faced with health issues, might have moved out of state, had a falling out with your family or any of a number of issues that makes them unsuitable to serve. Don’t be uncomfortable about making such a change; chances are that a trustee will breathe of a relief and so will your family. At Family Estate Planning Law Group, we know your estate plan isn’t a one-time deal. Your life changes, your family circumstances change, your assets change and so does the law. That’s why we work with all our clients on an ongoing basis. We regularly communicate with our clients to ensure their estate plan still answers their needs and work with them to update it as things change.
For more information on our unique ongoing maintenance program, explore our website and contact us to schedule your consultation today!
Reference: Motley Fool (July 11, 2017) “How to Find the Right Estate Trustee”