A decision many people struggle with when creating their estate plan is deciding on a successor trustee to administer their trust if they die, become incapacitated, or are unable or unwilling to continue serving as trustee. This article discusses several options for successor trustees, as well as some of the advantages and disadvantages of each option.
A trustee has a duty to manage trust property for the benefit of the trust beneficiaries who have been chosen by the settlor (the person who created the trust). Generally, any adult can serve as trustee. Many people choose to name a trusted friend or family member as successor trustee. These people often have a good understanding of the settlor’s values and can use that knowledge to make sure that they are complying with the settlor’s intent while administering the trust. However, there also are disadvantages of naming these people. A friend or family member, such as a parent, sibling, or cousin, may pass away around the same time or before the settlor and may not be able to administer the trust for long, if at all. They could have a tough time making decisions that may benefit some beneficiaries over others or trouble saying no to a trust beneficiary out of concern for the effect that decision could have on their relationship with the trust beneficiary. Although a child is more likely to survive the settlor, naming one child over another may present similar issues. One child also may have trouble listening to another, and sometimes may bring up disputes from decades ago that many thought had been long forgotten. On the other hand, naming multiple children as co-trustees presents its own issues. It may be difficult for children to agree on a decision, or even if they can agree, it may be difficult to get all of them to sign off on trust-related documents because of their geographic locations and time zones, work schedules, and other commitments. A surviving spouse usually is a good option, but he or she may have trouble coping with the loss of a spouse, and in the case of blended families, he or she may not have the best relationship with the children from a prior marriage. When naming a friend or family member as a successor trustee, it is important to remember that this person should be able to be objective and be able to comply with the time commitment, recordkeeping, reporting, and other trust administration requirements while coping with the loss of a loved one.
For those who are unable to decide on an individual as a successor trustee, have blended families, or have trusts that are likely to continue for multiple generations, a corporate trustee may be a better option. A corporate trustee, such as a bank or trust company, is more likely to be objective, have a better understanding of its duties as trustee, administer the trust without triggering unintended tax consequences, and have a system in place to ensure continuity of administration. However, a corporate trustee also may have a less personal touch, be harder to reach, be stricter with investments and distributions to beneficiaries, and take longer to make decisions because some actions may require approval by committees. A corporate trustee generally charges higher fees, but often does not need as much guidance from attorneys, which may result in savings on legal fees in administering the trust. Before naming a corporate trustee, it is important to make sure that the trust meets the corporate trustee’s minimum requirements.
Private Professional Fiduciaries
In California, a private professional fiduciary licensed by the California Department of Consumer Affairs Professional Fiduciaries Bureau is another option for a successor trustee. A private professional fiduciary may be a more affordable alternative than a corporate trustee, but have less staff and other resources than a corporate trustee. A private professional fiduciary also can serve as a neutral third party and may be able to alleviate the burden on a family member or friend, but may have a less personal touch than a family member or friend.
These are only a few options and factors to consider in selecting a successor trustee. Each situation is unique and should be discussed with your attorney.
Mary Nguyen is an associate attorney in Berliner Cohen’s Estate Planning Group. She can be reached at firstname.lastname@example.org or 408-286-5800.