Successor Trustees

One of the biggest decisions you will make when creating your living trust is choosing your successor trustee. Your successor trustee is just like an executor to a will, but she or he will not have to go to court when it comes time to administer your trust. Your successor trustee will collect and manage your assets, pay your debts, and make distributions to your beneficiaries after you pass away. Your successor trustee should be someone you is trustworthy, someone who is reliable, and someone who is experienced with handling money and managing property.

In my career as an estate planning attorney, I have seen successor trustees abuse their power or misuse trust assets. I always tell my clients it is important to select a successor trustee they count on, as that person will ultimately be responsible for protecting and distributing your assets to your loved ones.

People often create a living trust without giving their choice of successor trustee the important consideration it deserves. I see my clients choosing from among their family members, with adult children or siblings being the first choice. In many cases, this is a good choice. However, in other instances, choosing the wrong family member as successor trustee can lead to a great deal of tension, anxiety, and conflict among family members that may result in lawsuits by beneficiaries against the successor trustee. A good choice for many of my clients is to select a trusted friend, colleague, or professional fiduciary. However, it is important to consider several factors before making your final selection.

The following are a few factors you should consider when selecting your successor trustee:

Capability
First, and most importantly, you need a successor trustee capable of handling the job. Being a successor trustee requires a lot of work. While it is a position of power over assets, it comes with many duties and obligations imposed by the Probate Code and your trust itself. If a successor trustee fails to properly carry out their duties and follow the law, they may be personally liable for any loss they cause to the trust or your beneficiaries.

Management Skills
Your successor trustee should have the ability to (1) manage financial assets, (2) follow the directions in your trust and the California Probate Code, (3) manage the personalities of the beneficiaries, (4) and work closely with other industry professionals, such as attorneys, accountants, and financial advisors. Each of these elements is vitally important for a well-managed trust.

Knowledgeable
It is important to find out if your trustee is well-informed about handling trust administration. This also applies to family members. You should talk to anyone who you have named as your successor trustee to see whether they even want to be a successor trustee, and if so, if they understand their duties and know what your expectations are for management of the trust estate. This conversation can make all the difference when it comes to the administration of your trust.

Independent Successor Trustee
If you feel trapped by your limited options, fear not. There are choices for successor trustees outside of your immediate family and friends. Some of these choices include corporate trustees and professional fiduciaries.

Corporate Trustees
Corporate trustees are financial institutions who act as successor trustees of your trust after you are gone. Some corporate trustees require your trust to have minimum 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 tend to be the most expensive option—charging 1.5% or more of the value of your trust assets on an annual basis. This can cost your estate tens of thousands of dollars.

Professional Fiduciaries
Private professional fiduciaries are individuals who make their living acting as successor trustees for people. In California, private professional fiduciaries must be licensed. Since it is their career, they are excellent at managing trust assets and they tend to charge less than corporate trustees. Good professional fiduciaries can help manage both the assets of the trust and the relationships of the beneficiaries. When we work with clients to prepare their living trust, if they are interested in considering a professional fiduciary, we have several referrals in California who we have worked with for years and we can recommend them.

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. If you are not sure who is the best person to choose, consult with an experienced estate planning attorney.