Estate planning poses a vital question: Who will seamlessly manage the transition and oversee any long-term trusts?
The decision about a successor trustee can stall the development of an estate plan. While it seems logical to nominate a spouse, child, friend, or business associate, each has its challenges. This discussion delves into these intricacies, highlighting the merits and drawbacks of appointing a neutral third-party trustee.
A popular choice for many is their spouse. In states like California, couples often establish joint living trusts, with the surviving spouse overseeing post-death duties. But this poses practical hurdles. Many essential post-death administrative responsibilities arise. An elderly surviving spouse might find the task overwhelming. Though professionals can manage specific duties, the onus remains on the surviving spouse for smooth operations.
Business interests present another challenge. Without prior involvement, a surviving spouse might lack the necessary expertise. In blended families, the situation intensifies. Naming a surviving spouse can lead to mistrust among children from prior marriages, sometimes even leading to legal battles.
Children - Assigning this role to a child or children presents its complications. They might lack managerial prowess or the zeal required. Busy lifestyles, mistrust, and sibling feuds can make the task harder.
Friends of the family - Few friends would willingly bear the successor trustee’s responsibilities. Beyond financial and legal tasks, a trustee navigates intricate family dynamics, especially during the emotionally charged post-death period.
Business associates - Entrusting a business partner seems logical, particularly in estates involving closely-held businesses. Yet, the complexities previously outlined apply here too. Conflicts might arise between the partner's interests and the family’s, complicating the process.
Considering these complexities, appointing a third-party trustee can be a game-changer. Here are three such options:
Private Professionals - Licensed experts with trust and estate backgrounds offer these services. Generally solo practitioners or small firms, they charge hourly or based on estate value. This choice suits less complex estates. Before finalizing, examine their experience, insurance coverage, expertise, and resources.
Bank Trust - Located within banks or financial entities, they have trust and investment experts. Governed by various oversight bodies, they usually charge according to the estate’s value. It's essential to inquire about fees, expertise in handling trust assets, and employee turnover. Understanding the business model and questioning their products' imposition is also crucial.
Multifamily Office Structured as a Trust Company: These specialize in serving families with intricate estate plans comprising various entities. These companies are apt for trusts with diverse assets. They offer a personalized approach, and their product solutions are vast and cost-effective. However, they cater primarily to estates valued at $10 million or above.
Geography also plays a role in the trustee decision.
If the trustee underperforms, remedies exist. Beneficiaries can be empowered to replace a trustee, or a trust protector can be assigned this role.
An adept trust attorney, familiar with all third-party trustee models, remains an invaluable asset for guidance.
