Difficulties selecting a successor trustee?

Difficulties in selecting a successor trustee?


Procrastination is not the only reason some people do not have their estate planning documents completed or revised. Sometimes it is because they do not know who to name as trustee if and when they cannot act for themselves. We have clients, who for different reasons, do not have a person they want to step in, if needed, as their trustee. Reasons vary, but the most frequent one I hear is that there is no relative close enough to handle our personal affairs.


Another stumbling block is that people may not want to saddle a friend or relative with the obligations that go along with being a trustee for their financial, medical, and personal affairs or for overseeing the distribution of their assets after death. Not having a good candidate for your successor trustee can delay action for enacting effective estate planning. But there are choices other than using a relative or friend to fulfill this role.


You can name a corporate trustee to take over your affairs when needed. Typically a bank trust department or a trust company fulfills this role. By naming ABC Trust Company as the successor trustee for your trust, and perhaps the executor of your estate, you have a backup plan in case you need one during illness, or to settle your estate. You can always change this should you determine a friend or relative can be substituted. One downside of this strategy is that it is impersonal. Another is that there are minimum fees for handling this work and a bank trust department or a trust company will not handle small estates. It is not uncommon to have minimum fees of $10,000 per year for such services from a corporate trustee.


A second alternative is to name an independent trustee as your successor trustee and/or executor. Usually an attorney or a CPA, and independent trustee is a person in a small, local firm. You can interview independent trustees and make your decision and therefore have a more personal relationship with your provider. Independent trustees have different charges, but a percentage of assets is typical and minimum annual fees are much lower than for most corporate trustees.


You do not pay for successor trustee services unless they become needed. You can name either an individual or corporate trustee in your estate documents once you have chosen one. If you name an individual or corporate successor trustee, you may want to ask if their services include overseeing medical or convalescent care decisions for you or your partner or spouse, if needed.


You can usually get referrals for both corporate and independent trustees from your estate attorney, financial advisor, or CPA. 


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