Deciding who you want to nominate as the successor trustee of your family wealth trust can be a daunting task, but it shouldn’t be. Having a basic understanding of the qualities you should consider in choosing a trustee will make the task much easier. A trustee, initial or successor, will be the person who manages and invests the assets belonging to the trust. He or she will also collect the profits from investments.
A successor trustee will also be responsible for paying any necessary expenses incurred for administering the trust and distributing the assets. Essentially, the successor trustee will be responsible for the same tasks required of the original trustee, if ever the original trustee is unable to do so.
Choosing the right successor trustee
The original trustee of a family wealth trust is usually the person setting up the trust. That would be you. Choosing who your successor will be, in the event you are no longer able to continue your obligations, is very important. The person you choose should be trustworthy, organized and reliable. Your successor trustee should be someone you believe will follow your instructions, as specified in the terms of the Trust Agreement. It is also a good idea to make sure your chosen successor will be willing to accept professional assistance, if necessary. There are different kinds of trustees available for you to choose from. A trustee can be an individual, a financial institution or even a licensed professional. Each type of trustee has its own advantages, as well as disadvantages.
Family or friends are the common choice
More often than not, clients choose a relative or a close friend. Certainly, choosing someone you know personally will have its benefits. You are likely to have more trust in that person, and be assured of receiving personal attention from them. Whereas a financial institution is more impersonal – having numerous trusts to manage. Another possible benefit of choosing a friend of family member is that he or she may not charge a fee for serving as trustee. This can reduce the overall cost of administering the trust.
There can be some disadvantages, however, to choosing family or friends. Though the person may be trustworthy, he or she may not be as qualified to handle the responsibility as a professional or institution. Another clear disadvantage is that, if your relative or friend decides to run off with your money or is just plain incompetent, you will have no protection. On the other hand, dealing with a financial institution or trust professional will generally include insurance or a bond to protect your assets.
Financial institutions as trustees
Many people select a trusted financial institution to be the successor trustee of a family wealth trust. Most major financial institutions have trust companies that are very qualified and proficient in serving as a successor trustee. The knowledge and expertise that a financial institution has in managing funds is an obvious benefit. The downside is that financial institutions typically charge a substantial fee for their services.
Licensed professional trustees
An advantage of choosing a licensed professional as a successor trustee is that the fees charged are generally lower than, say, a financial institution or trust company. Your estate planning attorney can discuss your options with you and help you decide which type of trustee will best fit your needs.
If you have questions regarding family wealth trusts, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.
- Estate Planning is Essential Whether You Are Married or Not - April 25, 2018
- Income Tax Basis in Estate Planning – Part 2 - April 23, 2018
- The Downsizing Generation: How to Handle a Surplus of Stuff When a Loved One Ages - April 18, 2018