The reason to establish a trust is simple: It can protect a family’s assets from estate taxes, divorce and creditors. But all that protection could be undone if you fail to include the right people in your plan.
When you establish a trust, you name someone to be the Trustee. A Trustee does what you do right now with your financial affairs - collect income, pay bills and taxes, save and invest for the future, buy and sell assets, provide for your loved ones, keep accurate records, and generally keep things organized and in good order.
Who Can Be Your Trustee
If you have a revocable living trust, you can be your own Trustee. If you are married, your spouse can be a Trustee with you. This way, if either of you become incapacitated or die, the other can continue to handle your financial affairs without interruption. Most married couples who own assets together, especially those who have been married for some time, are usually Co-Trustees.
However, you don't have to be your own Trustee. Some people choose an adult child, a trusted friend or another relative. Some prefer the experience and investment skills of a professional or corporate Trustee (e.g., a bank trust department or trust company). An important point to keep in mind is that naming someone else as Trustee or Co-Trustee with you does not mean you lose control. The Trustee you name must follow the instructions in your trust and report to you. You can even retain the flexibility to replace your Trustee should you change your mind.
When to Consider a Professional or Corporate Trustee
You may have no children or others you trust nearby, you may be elderly, widowed, and/or in declining health. Or your potential candidates may not have the time or ability to manage your Trust. You may simply not have the time, desire, or experience to manage your investments by yourself.
Other common scenarios where a professional Trustee or Co-Trustee may be a good investment is in blended families and when family members are in business together. Naming a professional Trustee in these situations can reduce the likelihood of family discourse and lawsuits stemming from perceived favoritism or poor investment choices as they have the experience, time, and resources to manage your Trust and help you meet your personal estate planning goals.
What You Need to Know
Professional or corporate Trustees will charge a fee to manage your Trust, but generally the fee is quite reasonable, especially when you consider their experience, the services provided, and the investment returns that a professional Trustee can deliver (Trust and probate litigation can often run into $100,000.00 or more- something that could be avoided by using a professional).
Further Actions to Take-
● Consider naming someone to be Co-Trustee with you now. This would eliminate the time a successor would need to become knowledgeable about your Trust, your assets, and the needs and personalities of your beneficiaries. It would also let you evaluate if the Co-Trustee is the right choice to manage the trust in your absence.
● Evaluate your Trustee candidates carefully and realistically. Talk to them about serving as Trustee and what you would expect from them if selected. Conversations are a lot easier to have when you’re alive and well, not so much when you’re incapacitated or dead.
● If you are considering a professional or corporate Trustee, talk to several. Compare their services, investment returns, and fees. If you’re not sure where to start, give our office a call. We work with several companies and can recommend contacts based on your individual needs and desires.
If you take nothing else away from this article, just remember-
● Selecting a Trustee involves numerous factors, many of them are unique to each family.
● You can be Trustee of your revocable living trust. If you are married, your spouse can be Co-Trustee.
● You can also choose an adult child, trusted friend, or a professional or corporate Trustee to serve as Trustee or even Co-Trustee with you.
● Naming someone else to be Co-Trustee with you helps them become familiar with your Trust, allows them to learn firsthand how you want the Trust to operate, and gives you the opportunity to evaluate the Co-Trustee's abilities while you’re still able to make changes if needed.
● Professional Trustees provide experience in managing your assets and can promote family harmony by serving as a neutral third party.
While this is an important decision and can potentially seem overwhelming, we are here to help you understand the best options for you and your family. We look forward to helping you and your loved ones. Call us today to set up your appointment!
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