When you create your family trust, pick a successor trustee with the right stuff. This person will administer the trust after you pass away or become unable to handle the responsibilities yourself. Extreme care should be taken when nominating a trustee and alternate trustees. The fiduciary responsibilities owed by a trustee to the beneficiaries are a serious matter. You need a trustee with the right stuff.
A trustee can be held liable for negligence in administering the estate. That’s why your trustee needs basic administration skills to competently manage and distribute estate assets and income. The trustee can also face serious legal and financial consequences for any intentional misconduct. So your trustee also needs to be a person you can trust.
And finally, the best suited individual will often be a person with the respect and cooperation of the other family beneficiaries. This person is generally best situated to lead and resolve any disagreement.
For most families the choices are very limited when it comes to trustee nomination. Sometimes the best choice is clear. Other situations require a great deal of consideration before settling on a trustee. You’ll also need to decide on a couple of successor trustees, who can serve if your first choice is unable or unwilling to serve.
Here’s three things to consider when picking the trustee with the right stuff:
- Trustee Capabilities & Experience – A trustee needs basic money management and organizational skills. Your trustee may be required to deal with the likes of banks, county recorders, creditors, estate property income, taxes, etc. While the services of a CPA, attorney and other professionals may be used, the trustee still needs to properly manage the assets. When a person has the fiduciary duty to manage money for someone else, negligence or misconduct can spell big trouble for the trustee. It’s not fair to the trustee or beneficiaries to create a situation where financial mismanagement is likely to occur.
- Personalities, Disorders, and Spendthrifts – We all have personal problems of varying degrees. Personal issues and circumstances can make a person unsuitable for taking on the responsibilities of trustee. For some people it’s difficult not to invade the trust assets for their own benefit. Others are irresponsible and make poor financial decisions. Often our loved ones fall into addiction or have other behavioral issues like gambling. Honesty and integrity concerns are another unfortunate fact of life. Sometimes laziness or apathy will bear on trustee suitability. While all these people may be beneficiaries, as a trustee they pose a risk to the beneficiaries and themselves for negligence or misconduct. The fiduciary duty of a trustee requires the individual to put their interests behind the beneficiaries’ interest. Individuals suffering from addiction or behavioral disorders may find it difficult to faithfully manage trust assets in compliance with the law.
- Family Dynamics – Regardless of whether your family is a dynasty or simple household, there are certain family members who have the influence and power. Some families have a matriarch whose wisdom always prevails. Others might have a sibling whose professional experience and education makes them the ‘go-to’ person for important family decisions. Who in your family is most adept at managing conflict and making important decisions with the support of the family? When choosing a trustee consider the family power and influence structure. Family leaders and decision makers are often the most natural choices as successor trustees.
TheLivingTrustSource.com says be thoughtful when nominating trustees for your family’s trust. The trustee with the right stuff will be a responsible family member or friend, with necessary administration skills, with the respect and support of the family.
1Source Law LLC