Choosing the Right Trustee

Choosing the right successor Trustee is an important step in establishing a Living Trust. Your successor Trustee is responsible for gathering and distributing your assets and settling your final affairs after you pass.  If you become incapacitated, your successor Trustee will manage the assets in the Living Trust for your benefit during your lifetime.  In some cases, the successor Trustee also may be responsible for managing assets held in trust for your beneficiaries for a certain period of time.  Depending on the nature of your assets, these tasks may be time-consuming, complex, and require a high degree of financial sophistication.
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• Example: Jefferson is named as the successor Trustee of his father’s Living Trust.  After his father dies, Jefferson is responsible for locating all of his father’s financial accounts and other assets, selling his father’s house in Meridian, and then distributing the proceeds from the Living Trust equally between himself and his brother James according to the terms of the Trust. 
• Example: Bethany is named as the successor Trustee of her sister Julie and her brother-in-law Steve’s joint Living Trust.  Their Living Trust provides for assets to be held in further trust for their son, Michael, until he reaches certain ages.  Julie and Steve die when Michael is 16.  Bethany is responsible for managing the assets Julie and Steve left in trust for Michael.  Pursuant to the terms of the Living Trust, Bethany can make distributions to pay for Michael’s college expenses and other living expenses.  Bethany can distribute 25% of the assets in the Trust to Michael when he reaches age 25 and can distribute the rest of the assets to him when he reaches age 30.

When selecting a Trustee, you should pick someone you trust, who is organized, fair, levelheaded, and comfortable discussing and managing financial affairs. We also recommend that you select at least one alternate successor Trustee who could step into this role if your first choice is unable or unwilling to do so.

Other considerations when choosing a successor Trustee include:

Age of your successor Trustee 

It is important to take into consideration the age of your Trustee.  If you are older, it’s fine to select a peer, such as a sibling or a good friend, but you also should select at least one successor Trustee who is from a younger generation than you.  If the terms of your Living Trust will require your successor Trustee to manage a Trust for the benefit of a loved one for many years—for example, for the benefit of a minor child, or a person who is not good managing money or who has substance abuse issues—you should consider how old the Trustee will be when the Trust ends.  You should not name your 80-year-old mother as the successor Trustee of a Trust that would not terminate for 20 years.  On the flip side, you should also avoid selecting a Trustee who is younger than 25, as they may not have the maturity to handle the task.

Potential for family conflict

It also is important to consider family dynamics.  If you have two children who do not get along, it may be better to choose a close friend to be your Trustee rather than one of the children.  Some clients in this situation try to solve this problem by appointing both children as co-Trustees.  However, naming successor co-Trustees often complicates matters, even when the co-Trustees get along well, because they must agree on all actions and may both be required to sign certain documents. 

Many parents automatically name their oldest child as their successor Trustee.  If this child is well-suited to the task, this is a good decision.  But relying solely on birth order without taking other traits into consideration can be problematic. 
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• Example:  Tom named his son George, who was easily overwhelmed and not good with money, as his successor Trustee because George was the oldest child and Tom did not want to offend George.  After Tom dies, George becomes Trustee.  George is overwhelmed by everything that he has to do.  He forgets to file Tom’s tax return on time, which results in penalties owed by Tom’s estate, and agrees to sell Tom’s house in Eagle to one of his friends without using a real estate agent.  George’s siblings become irritated with how long George is taking to distribute the estate and his mismanagement of funds, creating a rift between the siblings.

It is better to run the risk of potentially offending a child who is not suited to the demands of serving as a Trustee/Personal Representative than to leave this critical task to someone who is underqualified.

Family dynamics are also relevant if you are holding assets in trust for an adult beneficiary.  In many cases, it is not a good idea to put one child in charge of another child’s assets. 

• Example: Kent’s father named him as the Trustee of his sister Mallory’s trust.  Because Mallory has a history of cocaine abuse, their father left Mallory’s inheritance to her in trust.  Mallory is very angry when she learns that she has to ask Kent for distributions from her Trust.  She calls Kent numerous times a week to ask him for money from her Trust and gets belligerent if he refuses to give her what she asks.

For clients who do not feel that any of their loved ones are suited to the role of Trustee or who do not wish to ask their loved ones to take on these responsibilities, using a professional fiduciary can be a good option.