Who Should be In Charge?—Choosing the Right Trustee
A living trust is a legal document that serves your during your lifetime and at your death. When you create a living trust, you are typically the trustee (the person in charge of the trust) and the settlor (the creator of the trust). When you pass away your back-up agent (successor trustee) will step up to administer your estate. In addition, if you become unable to manage your assets due to health reasons, you can voluntarily resign or be removed as trustee by a doctor’s note.
When deciding who will be the best fit to act as your successor trustee, you want to consider the person’s capability, aptitude, and temperament to be a trustee.
First you need to consider if your friend or family member has the capability to be a trustee of your trust. Specifically, do they have the time, financial flexibility, and commitment to take on the role? A trustee must deal with the day-to-day business of the trust (e.g., pay bills, collect assets, review insurance, etc.). They are also responsible for filing income tax return and preparing annual accounting. Finally, their job as trustee could last for years. For example, if your daughter is the on-call heart surgeon at the county hospital, she likely does not have the flexibility in her job to be able to administer your trust.
Even if you have someone in mind that is capable, you also need to consider whether they have the aptitude. As noted above, the trustee is responsible for a lot of important financial and tax duties. The role of trustee can be especially challenging when you have more complex assets. For example, you adore your best friend, and you know she would do the best possible job that she could, but she is terrible with money. She might not have the aptitude to manage the money or other assets in your trust.
Just as important as capability and aptitude of the trustee is the individual’s temperament. Your trustee has a responsibility to be objective, impartial, and fair to all beneficiaries. Your son may love you dearly, but he may not have a good relationship with his siblings; as a result, he likely would not be a good fit as trustee because it would be challenging for him to be fair.
If you do not have a friend or family member to serve as a good trustee, there are other options available. You can hire a corporate trustee, which is usually a bank. Banks offer expert professional knowledge and financial services in one place. Banks are a stable permanent institution, so your trustee will be available and ready to serve when you need them. The downside of using a bank is that they often require a minimum amount of assets and are typically suited to larger more complex trusts.
Another alternative is a private professional fiduciary. A private professional fiduciary is an individual, licensed and bonded by the State of California, for hire as trustee. Typically, they do not require a minimum amount of assets and fulfill the duties of trustee for an hourly fee. A private professional fiduciary is also more likely to be available to assist with healthcare and end-of-life decisions when a bank is not willing to be involved.
It is important to review who you have named as successor trustee on a regular basis to ensure that that they are still the right fit for you and your family. Please call our office at (408) 402-4064 to schedule your complimentary consultation if you would like to discuss changing your successor trustee.
All materials have been prepared for general information purposes only to permit you to learn more about our firm, our services, and the experience of our attorneys. The information presented is not legal advice, is not to be acted on as such, and may be subject to change without notice.