Choosing a Trustee
One of the aspects of setting up a revocable trust that cannot be taken too lightly is the choice of a successor trustee. In most cases you are the trustee of your revocable trust during your lifetime. This gives you the authority to manage your assets in the same manner as you did before setting up the trust. However, if you should become incapacitated or upon your death, another person appointed by you will take over the management of the trust. This is the successor trustee.
If the successor trustee takes over as a result of your incapacity, he or she will manage your finances, pay your bills and make sure you are taken care of financially. If the successor trustee takes over as a result of your death, he or she will distribute the trust assets in accordance with your wishes as stated in the trust agreement. Depending on the terms of your trust, the successor trustee may have a great deal of discretion in determining how the assets are invested and distributed.
For this reason, the selection of your successor trustee should be a serious, well thought-out decision. The following issues are considerations that should be made in selecting your trustee.
1. The successor trustee should be familiar with you and your wishes regarding how your assets should be managed, invested and distributed. At times a successor trustee will have discretion as to whether or not to distribute assets to a particular beneficiary. The beneficiary may need money for education, may not be good a managing money or may have special needs. The successor trustee should be familiar with these circumstances and know what your wishes are regarding them.
2. The successor trustee should be a responsible person that you have confidence in. For this reason, many people choose spouses, adult children or other family members or close friends. The factor of trust is usually more important than their knowledge since the successor trustee can rely on an attorney and accountant to help them administer the trust.
3. The successor trustee must be agreeable with the appointment. Some people do not want the responsibility of serving as a trustee. You should discuss in detail the duties, responsibilities and expectations with your successor trustee before naming him or her.
4. You may want to consider naming more than one person as your successor trustee. Many people name two or more of their children as co-successor trustees. This has the benefit of taking advantage of each child's strengths. It also eliminates the perception of showing favoritism to one child over another. The disadvantage of naming more than one trustee to act together is ..... they must agree and act together. If you select two persons who have a history of not being able to work together, the position of trustee usually magnifies this problem.
5. If you cannot come up with an individual to serve as trustee, you may wish to consider a corporate trustee. Many banks and investment companies have trust departments that specialize in serving as trustees of trusts. The advantages include the expertise and knowledge they have in administering trusts and estates, the fact that they can act in an unbiased manner (family politics will not affect the management and distribution of the trust), and the fact that they are bonded and insured. Disadvantages of corporate trustee are the fees (they are usually higher than those paid to a family member) and the fact that they don't know your family's dynamic. Further, some corporate trustees require a minimum estate size in order to serve.
You should also consider naming a back-up or more than one back-up to your successor trustee. If the person you have chosen as your successor trustee dies before you, becomes incapacitated or moves away, you should have someone you trust to step in and serve.