TrusteeTrustee Considerations

Trustee Considerations

August 23, 2023 (1y ago)

Whether you are reviewing your existing revocable living trust or creating a new one, it is important to understand the role your successor trustee plays in, not only handling trust matters, but also providing for and protecting your loved ones upon your death.

A trustee is a principal decision maker who is tasked with handling all matters that relate to your trust. In almost all circumstances, you are or will be named as the initial trustee of your revocable living trust, then, upon your incapacity, death, or inability to act as trustee, the successor trustee steps in to manage the trust.

Acting as a trustee involves a number of important tasks, which includes but is not limited to the following:

• Managing accounts and other assets owned by the trust. While the trust owns the accounts, an individual needs to carry out the transactions relating to those accounts. For example, if the trust owns an investment account, the trustee must watch the investments and request any adjustments that may be needed to ensure the best outcome for the trust and its beneficiaries. • Keeping the trust beneficiaries informed about the trust. While the trustee decides how trust accounts and property are utilized, her or she does so on behalf of and in the best interests of the trust beneficiaries. As such, the trustee must inform the trust beneficiaries regarding the status of the trust (i.e. what the trust owns, how much it is worth, what income it has received, and the expenses it has paid). The trustee is effectively the point person for trust matters. If a beneficiary has questions about the trust, the trustee should be best suited to answer that question. The trustee is also in charge of filing the trust’s tax returns.

While it may be advantageous for the trustee to be financially savvy or have a background in law, finance or tax, that is not a prerequisite by any means. As such, when considering a potential successor trustee, it is important to look for the following traits:

• The trustee needs to know how/when to ask for help when needed. Again, the trustee does not have to be an expert, but does need to know when the obtain assistance from financial advisors, tax preparers, and attorneys (at the trust’s expense) to properly carry out his/her responsibilities.
• The trustee should be organized and detail oriented. There can be a lot of moving parts based on the trust’s distribution plan and number of beneficiaries. Because of this, the trustee should be aware of key elements and provisions of the trust. Additionally, trust administration is a process that involves very specific legal steps that must be taken. Accordingly, the trustee with need to keep a detailed list of everything the trust own and keep good record of its income and expenses. Being too general with this information can cause tension between the trustee and beneficiaries. This also means the trustee must refrain from mixings trust matters with his or her personal matters. • The trustee ought to have good communication skills. The trustee should always act in the best interest of the beneficiaries and, as such, it is important to clearly communicate, deliver information, and be available to answer any questions in a timely manner.

As serious as it is to choose the appropriate individual to act as trustee, there are a number of options available to you which depend not only on your circumstances, but also, and perhaps most importantly, what matters most to you.

• Family members (i.e. spouse, child, sibling, parent, etc.) and/or close friends have an intimate knowledge of your values and wishes, which can make trust administration easier if you want to give your trustee discretion when making decisions. However, depending on family dynamics, a close friend may not want to be involved in conflicts that may potentially arise. • A professional third party can provide additional asset protection if preserving and protecting your beneficiaries’ inheritance is a concern. Because administering trust is their profession, they will understand all steps that need to be taken and have the tools to do so. However, because trust administration is their job, compensation will be required.

If you have any questions about trustees or trusts in general, I am always available to help guide you through the decision-making process and answer any questions you might have along the way.



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