Naming a successor trustee is treated as an afterthought when creating trusts, though it’s one of the most important decisions involved.
When creating a living trust, many people designate an adult child as successor trustee—without first discussing it with that person.
As a result, many designated trustees are completely unaware that they’ll be assuming this role until the trust’s creator, their parent, become incapacitated or dies.
When spouses are designated trustees, they tend to be aware of this eventual role far in advance, as couples usually discuss such matters. But many parents are reluctant to discuss the inevitable with their adult children and vice-versa.
Thus, successor trustees often have no awareness of this role until they must assume it. And when the time comes, even if they’re willing, they may not be prepared or able to execute the duties required.
This scenario can lead to poor estate administration, declining estate values and conflicts among heirs that can lead to litigation, resentment and a boatload of stress for everyone involved.
But if successors are aware of this role and what it involves well in advance, these problems might be avoidable.
Selection and preparation of suitable successor trustees can be assured by acknowledging the parent’s mortality and discussing eventualities (Typically, adult children are designated when only one parent is alive).
These discussions should center on the wishes of the parent creating the trust, the common interests of the beneficiary children, and the best ways to serve these interests fairly, transparently and efficiently.
Usually, the best context for such discussions is a family meeting where all considerations are aired and, ideally, family members agree on whom the successor trustee will be. Also, families should outline the specific duties of the trustee, the guiding principles for performing them and the preparation necessary, if any, to assume them. These items can then be included in trust documents by a qualified estate attorney, contingent on that professional’s advice.
Items for discussion at such meetings include:
Of course, family discussions on these topics can be difficult in dysfunctional families or those where longstanding distrust among siblings fosters fears of self-dealing by the trustee.
In such cases, siblings’ fears may be allayed by including specific guidelines for estate administration, during incapacitation and after death, in trust documents.
All too often, naming a successor trustee is treated as an afterthought when creating trusts, though it’s one of the most important decisions involved.
Discussing the duties in advance with the designated trustee—and getting the whole family involved—is the best way to avoid bequeathing problems to heirs.
David Robinson, a Certified Financial Planner, is founder/CEO of RTS Private Wealth Management, an SEC-registered firm in Phoenix that provides fiduciary services to help clients achieve their financial goals. His practice focuses on helping wealthy individuals with custom financial plans, using a holistic approach to grow/protect wealth, manage taxes, identify insurance solutions, prepare for retirement and manage estate plans.