by Judd Matsunaga, Esq.
Congratulations! You’ve protected your family from probate by setting-up a revocable living trust. Chances are, you’ve appointed yourself as the trustee of your trust. Thusly, you’ve maintained full control over your assets and eliminated paying any professional fees. But who’s your trustee upon your disability or death?
If you don’t know, look at your trust (it would be a good idea to find it). Find the section that talks about “SUCCESSOR TRUSTEE.” It should say something like, “upon death or disability of original trustee (i.e., you), “so and so” is to act as successor trustee. There might even be an alternate “successor trustee” named just in case the first one is unable or refuses to act.
In the event of your incapacity or disability, the successor trustee would take over to: (1) Oversee the care of the ill person; (2) Apply for disability benefits; (3) Apply for insurance benefits; (4) Looks after care of any minors and dependents; (5) Notify bank and other financial institutions; (6) Transact necessary business; and (7) Keeps accurate records and accounting.
In the event of your death, the successor trustee would take over to: (1) Contact the attorney to review trust and administer the trust; (2) Inventory assets, determines current values; (3) Collect death benefits; (4) Pay bills and other expenses; (5) File tax returns; (6) Pay bills, do the final accounting; (7) Make partial distributions if needed; (8) Keep the beneficiaries informed; and (9) Distribute assets to the beneficiaries as the trust directs.
For most of you, your successor trustee is probably your adult child(ren), the same person(s) named as the beneficiaries of your trust. Or, if you have no adult children, a relative or friend. Hopefully, that person(s) is good with financial matters, or has the sound judgment to seek professional assistance. They will be charged with the responsibility of carrying out your instructions as set forth in your trust.
It would be a good idea to make sure that the family member or friend will accept the responsibilities of being your trustee. They may be too busy with their own affairs, may reside in a distant area, may not get along with other family members, or may not be responsible or experienced enough to manage the trust assets. Quite possibly, they may not want to take a chance at getting sued by a troublesome beneficiary, even though no wrongdoing occurred.
Being a trustee can be a massive job. As a result, many of you should consider the idea of having a professional, i.e., a corporate trustee, act as trustee instead of a family member or friend.
A corporate trustee has full responsibility for managing your trust assets according to your instructions.
A corporate trustee would be an excellent choice if you are elderly and have no one you can trust to take care of your financial affairs. You may be widowed, have no children or other trusted relatives living nearby (or don't want to burden them), or you and your spouse may be in declining health.
Even if you are capable of managing your own trust, a corporate trustee can be a wise choice. You may not have the time, desire or investment experience to manage your trust yourself. Or perhaps you just feel that someone with more time and experience could do a better job than you.
With a corporate trustee, a bank or trust company, you have the assurance of ongoing professional management and accountability. The primary disadvantage, however, is it will cost your estate more in fees. In general, however, a trustee’s annual fee runs from ½ of 1 percent of the value of the assets being managed, depending upon the degree of management involved.
It is possible for you to have a corporate trustee serve as a Co-trustee with your family member or friend. This would give you the professional experience and objectivity of a corporate trustee and the personal involvement of someone who’s familiar with the family’s dynamics with knowledge of specific needs of each of the beneficiaries.
If appointing a corporate trustee as “co-trustee” with you family member or friend sounds like a good idea, make sure you shop around. Talk to several corporate trustees first. Compare investment returns, fees (including when and how much the last increase was), and services. Ask to see samples of statements or reports you would receive and see how easy they are to understand.
Facts and numbers are important, but so are the people. Do they seem to genuinely care about you and your family? Do they listen and seem to understand your concerns? Can you understand them? How confident are you that they will be there for you and your family when they are needed.
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