Without encouragement from trusted advisors or loved ones, few seniors will take the time to arrange for someone else to handle their financial issues when they can no longer fully care for themselves.
It’s an easy decision to put off, because it’s emotionally stressful to consider losing your cognitive abilities and independence to financially care for yourself. Managing your own affairs is something most of you have done for yourselves all your life, and it’s difficult to imagine not being able to do so.
Some people lack a sense of urgency about handling this decision until they’re experiencing a loss of cognitive ability that is clearly recognizable. But the absolute smartest time to settle this issue is before a change becomes medically necessary.
When our firm creates a Revocable Living Trust (RLT) for a client, one of the first decisions that we help clients make is choosing someone trustworthy to assume the role of a successor trustee – the person who manages your trust and assets when you pass or become incapacitated.
Making this decision is not as simple as picking a favorite aunt or an eldest child. Choosing can be difficult. That’s why we’re sharing some basic advice on picking an after-death or disability trustee.
The initial questions you must answer are:
• Who do you want to be in charge?
• Are all the correct planning documents in place?
• Do you have a written investment policy?
• How will the transition occur to move authority to the successor trustee?
Role of a Successor Trustee
The successor trustee manages the assets in the trust in the best interests of the beneficiaries (which includes you, in the event of incapacitation) and makes decisions on how assets are invested or released.
You need assurances that the person you choose is responsible, will carry out your wishes, make sound judgments and seek professional advice on managing the trust.
Typically, this role is often assigned to a spouse, relative, close friend, business associate, professional advisor or a corporate fiduciary. Sometimes, co-trustees are chosen from a combination of candidates.
A relative can be a great choice if he or she:
• Is competent to handle finances and will follow the trust’s instructions.
• Has time and interest to take on the role.
• Will avoid family conflict by being unbiased and unemotional when making decisions.
It can also be wise to name a corporate fiduciary as the successor trustee. Some RLTs are complex or may be designed to benefit heirs for many years to come. Trust companies and banks are regulated by the government and can manage assets for decades. Their advantages include:
• They don’t die or become incapacitated.
• They act objectively in following the Trust.
• They keep detailed records and have estate administration, tax, and investment expertise.
Sometimes a professional who is familiar with your estate plan is a good choice, providing there is no conflict of interest. This could be a financial advisor, an estate planning attorney, a tax professional, or a combination of these professionals.
Regardless of whom you choose, the basic elements of a good successor trustee are the same: integrity, good judgment, and objectivity.
We hope this information is useful to you and helps you and your family. If you have a specific case or a question, please don’t hesitate to call our office.