Who is the RIGHT person to manage your estate?
An important, and often confusing, step in an estate plan is selecting a trustee. A trustee is responsible for managing a trust on behalf of its beneficiaries and distributing assets according to the trust's specifications (see our article "What does a Trustee do after the Settlor dies?"). Finding the right person to be in charge can be the difference between positive and detrimental family relations after you depart, so take the time to select the right person.
In our next issue of "Estate Planning & Probate News," we'll discuss how to select a professional fiduciary. In this issue, we're assuming you've made the decision to hire a non-professional trustee.
Family member or friend?
It is true that your trustee should be someone that you trust implicitly to be in charge - but that is just the starting point. An "old school" approach is to select the oldest child, regardless of whether the person has the best skill set to be the trustee. Unfortunately, this approach is often one of the most likely options that can result in infighting, misunderstandings, poor management, and litigation (especially if your children don't get along). For instance, the child who steamrolls everyone else doesn't really listen, maybe has some financial messiness of their own (divorce, too much debt, can't balance a checkbook) is not a good candidate for a trustee and certainly not the person who's going to treat everyone in the family loyally and neutrally. If you do want to select a child, it is highly recommended that you evaluate your selection based on criteria other than birth order.
Other non-professional trustee options include non-immediate family members, friends, and trusted business colleagues. Usually, these are selected because they respect you and your goals, understand your family's dynamics, and will not charge a trustee fee.
Top Ten Factors to Consider
It is clear that choosing a non-professional trustee can be tricky. There is a lot to consider, so let's look at the "top ten" factors that many trustors look at when choosing a non-professional trustee:
- Location: It doesn't help when the trustee is hundreds of miles away from your property and possessions. That means that the trustee will have to make many (costly) trips, or more likely, must rely upon local help - who possibly should have been selected as trustee in the first place.
- Financial acumen: If you're considering who should act as the trustee, you likely have a reasonable amount of financial assets that require knowledge and expertise. Since the trustee is responsible for gathering all your assets, paying off your debts, and distributing your assets per your wishes, selecting someone who is good at finances is a great step.
- Organizational abilities: Estates can be complicated, so it can be useful to select an individual who is effective in managing everything from bill paying to real estate disposition to handling financial institution investments.
- Age and health: Quite often a trustee needs to get their hands dirty, sorting through furniture, moving boxes to find records and other activities that are impractical to ask a laborer in to help every time this is needed.
- Flexible schedule: Can the trustee literally drop everything to help with your estate? Handling an estate can be very time intensive, especially in certain phases such as asset disposition.
- Communication and social skills: Talking to distraught family members in a diplomatic manner can be tough in the best of circumstances. Common courtesy sometimes gets thrown out the window when a trustee has to work with relatives.
- Common sense: Unfortunately, some non-professional trustees demonstrate very poor judgment, getting themselves in a lot of trouble and causing big problems for the estate.
- Fairness and objectivity: To do the job effectively, a trustee needs to be objective. Decisions need to be made fully on behalf of all the beneficiaries and not out of any self-interest. This can be difficult when a family member is a trustee.
- Care about you and your legacy: Settling your estate may take one year or longer. Will the trustee be willing to devote the energy to settle it correctly, vs. rushing to get it done? Do you want a trustee who will take care of distributing your personal possessions - or are you comfortable with "just take it all to the dump"? Believe it or not, the latter happens more frequently than you might think.
- Willingness to get legal guidance: The potential financial consequences of legal or tax errors by a nonprofessional executor not only hurt the beneficiaries of the estate -- the trustee could be responsible personally for taxes generated because of his or her mistake, and fiduciary lawsuits are the largest source of probate/trust lawsuits. Retaining a trust attorney is generally an advisable move.
Specialized Estate Administration Expertise
All of your best-laid plans can result in a firestorm if you don't put the right person in charge of your estate. The good news is that Mortensen & Reinheimer, PC is ready to help each step along the way. Please contact us at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.
About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.