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How to Choose a Trustee – Part One

INTRO: Establishing a Revocable Living Trust for yourself and your family is worthwhile for many reasons: avoiding probate; maintaining privacy; controlling when and how young loved ones inherit assets; estate tax mitigation; etc. But perhaps the most compelling reason is to create a “financial succession” vehicle, designed and optimized to ensure that your assets are handled the way you want, both during your life and after you’re gone.

A Revocable Living Trust (“Trust”) has three “stakeholders”: 1) the Settlor [aka “grantor” or “trustor”] – the person who establishes the trust; 2) the Beneficiaries – the people who benefit from the trust; and 3) the Trustee – the person who manages the trust. As long as a Settlor is willing and able, he or she typically serves as his or her own Trustee (or if the Settlors are married, the spouses serve as Co-Trustees).

A much more difficult but important question is who should serve as Successor Trustee(s) and thus manage the Trust – the Settlor’s financial affairs – when the Settlor (or if married, when one or both Settlors) dies or becomes unwilling or unable to do so. This has many implications and should be thought through carefully and discussed in detail with your estate planning attorney.

First, it’s critical to step back and ask what the appropriate criteria are for choosing a Successor Trustee. There is no “one size fits all”. It depends on all relevant facts and circumstances, including the makeup of the Settlors’ family and their loved ones, assets, and objectives.

Certain criteria are intuitive. The starting place should always be trustworthiness. If trustworthy, is the person responsible and reasonably good at handling financial matters? Regardless of how trustworthy, a Successor Trustee is not going to be helpful if he or she isn’t the type who gets up in the morning and takes care of business. Geographic proximity is a factor, but tends to be less important now because of technology advances in managing assets from afar. Emotional character and personality should be assessed since one or more trust Beneficiaries (often related to the Successor Trustee) may try to manipulate the Successor Trustee. For example, a Beneficiary may make requests and try to persuade the Successor Trustee to exercise certain Trustee-authorized discretion in a manner that may not ultimately be in the best interest of that Beneficiary.

PART TWO: Rob explains why haste makes waste in How to Choose a Trustee – Part Two.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

TRUSTEE ADMINISTRATION: Need to find an experienced estate & trust administrator in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on a Revocable Living Trust, “Summary” Estate Administration, Trust/Estate Beneficiary Representation and Will & Trust Disputes.

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