A Last Will and Testament remains the cornerstone for most comprehensive estate plans; however, additional tools, strategies, and techniques are commonly used to help reach various estate planning goals and objectives within the overall estate plan. In recent years, including a trust in an overall estate plan has become increasingly popular. Trusts are broadly divided first into “testamentary” and “living” trusts. A testamentary trust is one that does not become active until the death of the Maker (the person who created the trust) whereas a living trust, as the name implies, activates during the lifetime of the Maker. Beyond those distinctions, there are a seemingly endless number of different types of living trusts. All trusts have one thing in common though – the need for a Trustee. Unfortunately, one of the biggest mistakes people make when creating a trust is appointing a Trustee without giving the choice the thought is deserves. Your choice of Trustee though can be the difference between the success and failure of your trust. With that in mind, who should be the Trustee of your living trust?
The best way to ensure that you appoint the right person, or entity, as the Trustee of your living trust is to make the decision after careful deliberation and consultation with your Missouri estate planning attorney. Do not make the mistake many people make of simply appointing a spouse/family member/best friend because you “trust” them without regard to the individual’s ability to fulfill the duties and responsibilities of the position. Before you consult with your attorney though, you might be able to narrow down your options by taking the following into consideration:
- Purpose of the trust – a living trust can be used to accomplish a wide variety of estate planning goals, including incapacity planning, asset planning, Medicaid planning, and Special Needs planning. Different skills and abilities may be preferable for different types of living trusts.
- Size and complexity of the trust – your best friend might indeed be capable of serving as the Trustee of the pet trust your create that has simple terms, modest assets, and a singular purpose; however, as the size and complexity of a trust grows so does the need to appoint a Trustee with the experience and skill to administer the trust.
- Potential conflicts – one of the potential problems with appointing a spouse/friend/family member as the Trustee of any trust is the likelihood of a conflict of interest erupting down the road. Often, a Trustee is given varying degrees of discretion with regard to disbursing trust funds to beneficiaries. When the Trustee has a personal relationship with the beneficiary it puts both parties in a difficult position.
- Financial skills – typically, it is the duty of a Trustee to protect and grow trust assets. To do this, the Trustee must have a certain degree of financial acumen. Expecting your brother, who can barely balance his checkbook, to make prudent investments with trust assets is unrealistic.
- Legal knowledge – a trust is a spate legal entity that must abide by applicable laws, including tax laws. Although a Trustee usually consults an estate planning attorney for complex legal questions, he/she should be able to understand basic legal principles and laws relating to trust administration.
- Ability to work well under pressure – administering a sizeable trust requires a Trustee who can handle pressure without letting it affect his/her job.
- Conflict resolution skills — conflicts often come up during the life of a trust. Beneficiaries often squabble with the Trustee over trust disbursements and/or over the investments made by the Trustee. Conflict resolution skills, therefore, are essential for a Trustee.
- Experience – there is simply no substitute for experience.
After reading through the above considerations it should be clear now why people often choose to appoint a professional Trustee instead of appointing someone they know personally. When the goals are to protect trust assets and grow those assets, it is often best to put someone with experience at the helm.
If you have additional questions or concerns about trusts, or appointing a Trustee for a trust, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.