One of the biggest decisions you will make when creating your living trust is choosing your Successor Trustee after you pass away. The Successor Trustee is the administrator of your Trust assets. The Successor Trustee will collect and manage your assets, pay your debts, and decide when and how your trust assets will be distributed to your beneficiaries after you pass away. The Successor Trustee should be someone you trust, someone reliable and someone who can handle managing money and property. Some Successor Trustees abuse their power to the detriment of the trust beneficiaries or breach their fiduciary duty to the trust. This is why it is important to select a Successor Trustee you trust.
Many people create Living Trusts without giving their choice of a Successor Trustee the important consideration it deserves. This can be due to the limited choices most people feel they have in selecting a Successor Trustee. Typically, the selection is made among the Settlor’s (a Settlor is the person creating a Living Trust) family members, with adult children or adult grand-children being the first choice. However, while this is often the best choice, it can lead to a great deal of tension, anxiety and conflict among family members that can result in lawsuits by trust beneficiaries against the Successor Trustee. Trusted friends, colleagues or professionals may also be a good choice after family members, but it is important to consider several factors before making your final selection.
The following are a few characteristics you should consider in selecting your Successor Trustee:
A Competent Successor Trustee. First, and most importantly, you need a Successor Trustee who can handle the job. Being a Successor Trustee requires a lot of work. While it is a position of power over assets, it comes with a many duties and obligations imposed by the Probate Code and the Trust document itself. If a Successor Trustee fails to properly carry out the Successor Trustee’s duties, then he or she may be personally liable for any damages he or she causes to the trust assets or the trust beneficiaries.
The Successor Trustee should be someone who has the ability to (1) manage financial assets, (2) follow the directions in the Trust and the California Probate Code, (3) manage the personalities of the beneficiaries, (4) and work closely with professionals, like attorneys and accountants. Each of these elements is vitally important to a well-managed Trust. While you may still want one of your children or grand-children to be your Successor Trustee, that person may not be the best choice if they do not meet these requirements.
An Independent Successor Trustee. There are choices for Successor Trustee outside of your immediate family. This includes Corporate Trustees and private Professional Fiduciaries.
Corporate Trustees are financial institutions who act as Successor Trustees of your Trust after you are gone. Some Corporate Trustees require the Trust have a minimum amount of assets before they will agree to act. The benefit of Corporate Trustees are they are in the business of managing Trusts and have the knowledge and experience required to do the job. They also have a team of professionals to oversee the administration or your trust. The downside is they also tend to be the most expensive option—charging anywhere from .75% to 1.5% of the value of your trust assets on an annual basis. This can cost your estate thousands, if not tens of thousands of dollars.
Private Professional Fiduciaries are individuals who make their living acting as Successor Trustees for people. In California, private Professional Fiduciaries must be licensed. Since they are in the business, they are good at managing trust assets and they tend to charge less than a Corporate Trustees. And good private Professional Fiduciaries can help manage both the assets of the trust and the relationships of the beneficiaries.
A Well-Informed Successor Trustee. Whoever you choose as Successor Trustee, don’t forget to find out if that Trustee is well-informed about handling Trust administration. This also applies to family members. You should always talk to your family member who you have named as your Successor Trustee to see whether he or she even wants to be your Successor Trustee, and if so, if he or she understands what the duties are, and knows what your expectations are for management of the Trust estate. This conversation rarely occurs, and yet it could be very beneficial to the administration of your trust.
Your choice of Successor Trustee is yours to make, so make sure you take the time to consider your options and the qualifications of the person you are considering for the job. Once you make your choice of Successor Trustee, trust in your Successor trustee.
Talk to an experienced estate planning attorney today and find out more creating a living trust and selecting your Successor Trustee.
I am estate planning attorney Eric Rudolph with the Law Offices of Eric A. Rudolph. We specialize in estate planning and trust & estate administration. Please call us at 760.702.4046 or e-mail Eric directly at firstname.lastname@example.org for more information.