You are thinking seriously about getting your estate planning done. You need to create a trust. You are in a quandary about who you should name as successor trustee. Read on and I will help you think through a few points about who you should name as successor trustee.

What Are a Trustee’s Duties?

Many trusts are only designed to avoid probate and control the distribution of your stuff to the beneficiaries of your choice, usually your children. These are rather simple, gather the assets and distribute them according to the instructions in the trust.

Other trusts aren’t so simple, even though you thought it would be when you created the trust. You didn’t anticipate a long administration by a successor trustee while you went down the path of dementia for several years. Your successor trustee has to manage and invest the assets in your best interest under the law. Long-term trust administration like this can become complicated and fraught with family conflict. The trustee is required to do trust accounting, investment, disbursements, reporting and more.

So, who should you name as successor trustee after you and your spouse can no longer manage your affairs?

1. Should you name a family member or a friend?

On the surface, it appears naming a family member who will also be a beneficiary would be a good idea, a money saving idea. You assume they will serve for free. Maybe a loving friend would do the same.

If there are siblings, this could be damaging to family unity. Be sure this is the best decision. It has been my experience after many years of acting as an expert witness in court cases where beneficiaries are suing trustees that even families in which there have been good relationships, managing of the trust estate can result in broken relationships.

If you already know a long held sibling rivalry exists, there is a good chance it will raise its ugly head in a trust dispute in the future.

I am not saying that will always be the case. It certainly isn’t. Often trusts are managed well by family members, and the non-trustee siblings appreciate the work done by their trustee-sibling.

2. Maybe a professional trustee?

In California, there is a growing business of the professional trustee.These are individuals, often CPAs or attorneys, but not always, who hold themselves out as professional trustees. There are a few advantages of this arrangement.

The trusteeship is outside the family and won’t get entangled in family disputes.

The trustee is an individual rather than a corporate entity. There won’t be a new trust officer assigned every so often – just as you got to know the previous one.

Professional trustees in California are licensed by the State and somewhat regulated.

The negative for a long-term trust is the possibility that the trustee won’t be in business long enough to serve out the life of the trust.

3. What about a corporate trustee

You could engage a Bank trust department or a corporate trust company. They will be around for a long time. Theoretically, they will be here in perpetuity. That makes sense for a long-term multi-generational trust. They will have professional trust officers handling trustee duties and will be held to the highest standards of conduct. They also have significant in-house investment expertise. Why wouldn’t you want to use a corporate trustee?

They are institutional, that is, they can be very impersonal and take on an air of ownership of the trust rather than stewardship of the trust assets. They may lose the personal aspect of caring for beneficiaries as well as caring for the stuff.

Speaking again from my experience as an expert witness, they don’t always manage assets in the best interest of the trust beneficiaries. They sometimes fail to invest properly under the Uniform Prudent Investor Act and end up costing the trust precious resources.

Nonetheless, some situations are best served by a corporate trustee.

4. The WorthPointe alternative.

WorthPointe Trust can offer what I think of as a hybrid model through our relationship with National Advisors Trust Company. Under this arrangement, your WorthPointe investment advisor continues to be your family’s financial advisor and continues to follow the investment strategies that have served you well for years. National Advisors Trust Company (NATCO) becomes the successor trustee and handles all the trustee duties: trust accounting, funds distributions, decisions that could be difficult for a family member to make, and is held to the highest fiduciary standards of corporate trustees.

Your WorthPointe financial advisor remains your point of contact, and most communications will take place with that advisor. This way you only deal with people with whom you have an excellent personal relationship.

If this article prompts questions that you need to be answered, feel free to contact me at Charles.Stanley@wpwm.com.

about the author: Charles L. Stanley CFP®, CHFC® & CKA®

CharlesStanley640x640Charles L. Stanley CFP®, CHFC® & AIF® is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Financial Consultant, and he holds the Accredited Investment Fiduciary® designation. For more than 20 years, Charles has served retired physicians, business owners, corporate executives, retirees, and widows, helping them with their estate planning, tax strategies, risk management, investment selection, business succession, and retirement planning.

Charles is a co-author of T.A.S.K. – The Trusted Advisors Survival Kit, published by LexisNexis and is the founder and editor of Capital Markets U.com Magazine: Investor Education for Main Street America. He recently published Forewarned is Forearmed: How to Make an Annuity Purchase (or not) You Will Never Regret. Additionally, he has been quoted or published in the Journal of Financial Planning, San Diego Union Tribune, San Diego Daily Transcript, American Funeral Director Magazine, Canadian Funeral Director Magazine, The Bottom Line – Independent Voice for Canada’s Accounting and Financial Professionals, Financial AdvisorPro, The Family Business Advisor, and Christian Businessman Magazine and was a contributing author to How to Manage a Million Dollars or Less. He also hosted Senior Money, a radio talk show heard on KCEO AM 1000 and he has appeared as an expert witness in both NASD arbitration and San Diego Superior Court.

Learn more and/or Contact Charles

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