Hi I’m Matthew Crider
One question I get a lot is “who should I pick as my successor trustee?”
A little background is in order. A trust is a legal relationship where a trustee holds legal title to property for another person, called a “beneficiary.” The trust document will name the trustee.
There are several different types of trusts. The simplest one is a revocable living trust. In this type of trust, usually the person who creates the trust is the trustee during his or her lifetime. Then, when the person who creates the trust dies, another person takes over as trustee. This trustee – known as the successor trustee – is named in the original trust document.
If you create a trust, you will need a separate person or institution, called a “trustee,” to manage the trust either now or in the future. Choosing the right trustee is crucial to making sure your wishes are carried out. The choice is important because being a trustee can be a difficult job. The trustee’s duties include making proper investments, paying bills, keeping accounts, and preparing tax returns. Bottom line, the trustee is supposed to follow the terms of the trust, for the benefit of the trust beneficiaries.
The law isn’t very strict about who may serve as your successor trustee. As long as the person is legally competent, meaning he or she is over 18 years of age and is capable of managing his or her own affairs, that person can be trustee. The trustee has a duty to manage the trust for the benefit of the beneficiary.
Time and again, I’ve seen people pick someone for the role of successor trustee who shouldn’t be the trustee. When this person – the successor trustee – takes over management and control of the trust assets, bad things can happen: For example, the trustee may mis-manage the trust property. The trustee may use the trust assets for his or her own benefit. And so on.
So how do you chose the right person as successor trustee?
First, the main consideration when selecting a trustee is picking someone who is trustworthy. You want someone who is going to follow your wishes as you’ve expressed them in the trust document.
Next, the trustee must have the ability to manage the trust. This means that the trustee is detail oriented.
Third The trustee does not need legal or financial expertise, but he or she must have good judgment.
If you don’t know anyone who meets these qualifications, you can look into hiring an independent trustee. This can be an individual or an institution who has some financial knowledge: Some examples include: a bank or trust company, a professional trustee, an financial advisor, a CPA, or a lawyer.
Of all the cases I’ve worked on where the beneficiaries have sued the trustee for mismanagement, none have involved a professional trustee. That’s not to say it doesn’t happen; Just that, in my experience, it’s the family member trustee who mismanages the trust property, not the professional trustee.
Choosing the right person to serve as your trustee is an important decision. In fact, I suggest that it is THE most important decision you can make about your estate. More important than who gets what, and when they get it.
Spend some time thinking about who you want to serve as your successor trustee.
If you have any questions, I’m Matthew Crider, and I’m here for you. Thank you for watching.