Estate planning is not filling out a form, entering information into a database, and signing documents. Effective personalized estate planning must include lengthy and comprehensive conversations with a lawyer who dedicates their practice to estate planning. A good estate planning lawyer will help you spot all types of risks, from being underinsured to caring for fragile beneficiaries to helping you avoid tax traps that you might not think of on your own.
Estate planning decisions come from the heart, after a guided conversation about the nature of your assets, the persons you have chosen to care for you and your children, and the person you are entrusting with your assets. You don’t need to be organized or have all of your insurance or financial information in order. You just need to feel ready to begin the process.
How to Choose a Successor Trustee
When you create a revocable trust, you usually need to choose who to name as your successor trustee. It is crucial that this decision is not taken lightly and that the right person is selected for the job.
Role of a Successor Trustee: If you become incapacitated, your successor trustee will step into your shoes and take full control of your trust assets on your behalf. This means he or she will have full authority to make financial decisions – including selling or refinancing trust assets. In fact, as long as the act does not interfere with the instructions in the trust document and does not breach any fiduciary duty owed, your successor trustee is given broad authority over your trust assets. The authority is very helpful in many circumstances because it avoids costly, time-consuming court proceedings, like guardianship, conservatorship, or probate.
After your death, your successor trustee (either the same person or a different person you have chosen) acts in a similar capacity as an executor of a will: taking an inventory of all trust assets, paying outstanding debts, selling assets (if needed), preparing your final tax return, and distributing any remaining trust assets according to the instructions in your trust document.
Under either scenario, your successor trustee will perform these acts without court supervision, providing your family with privacy and usually reducing costs. While a revocable trust allows your affairs to be handled efficiently and privately, it is up to your successor trustee to ensure the administration begins on time and stays on track. The successor trustee need not be an expert on what to do and when. Your estate planning attorney, CPA, and other financial advisors can be enlisted to help guide them through this process, or your revocable trust can allow them to bring on a professional as a co-trustee.
Choosing a Successor Trustee: A successor trustee can be a spouse, adult child, other relative, trusted friend, or corporate trustee. If you chose a non-corporate trustee, it is important to name a sequence of people in case your first choice cannot act as trustee. Whomever you choose, it should be someone you know and trust, whose judgment you respect, and who will respect your wishes and carry them out accordingly.
When deciding who should be your successor trustee, keep in mind the type and amount of assets held in your trust, the complexity of the terms of your trust document, and the qualifications of your candidates. Taking over as trustee can require substantial time and demands a certain level of business and common sense. Make sure you ask the people you are considering as successor trustees whether or not they want the responsibility of managing your trust. Successor trustees should be paid for their time and work. This can be done through your trust document, which should provide for reasonable and fair compensation. Of course, corporate trustees will only accept a position if there’s compensation. If you’re considering a corporate trustee, it’s a good idea to start looking around now.
