If you have a trust as part of your estate plan, one of the most important decisions you will make is choosing your successor trustee.
This person will oversee your trust and manage it according to your wishes stated in your trust documents.
The trustee’s work can be time-consuming and complicated in larger or more complex estates.
It can also incur legal liability. For this reason, many people consider hiring a professional trustee.
Your estate planning attorney can serve as your successor trustee, but they will need to sign a separate engagement letter from the one used to create your estate plan.
Here is a checklist of points to consider when choosing a successor trustee. Before choosing a successor trustee, you want to ensure that they have the resources and capabilities to fill this role.
1. Does your trustee have an effective booking system?
Trust funds must be kept separate from other accounts, such as business accounts.
A system must be in place to keep separate records of income and principal, account disbursements, receipts, capital transactions, etc.
The trustee must be able to provide the beneficiaries with a complete account of the trust’s transactions, accounts, and property.
A good bookkeeping system maintains clarity and transparency about all financial transactions.
This can help ensure that the client’s funds are not commingled or misused.
2. Is your professional trustee equipped to handle other trust-related documents?
Does your professional trustee have the resources needed to handle other record-keeping tasks such as:
- Preparing tax returns
- Handling trust-related correspondence
- Keeping track of steps taken when making discretionary distributions
3. Does your trustee have the staff and connections to offer a wide range of services?
Does your professional trustee have business relationships with tax preparers, financial advisors, and other professionals to offer a wide range of services?
Do they have enough highly trained and experienced staff to ensure that each client’s trust is well managed?
4. Is your professional trustee accessible?
Does your professional trustee have enough time in their schedule to manage your trust and respond to your questions?
Your trustee needs to be accessible and responsive, especially when your trust documents stipulate that distributions must be made for a beneficiary’s health, education, maintenance, and support.
For example, suppose you need an unexpected medical procedure. The trust should disburse the funds to cover this procedure.
You need a trustee who will respond to your request for funds promptly.
5. If your trust has a complex distribution scheme, does your trustee have the time to manage it?
Administering a trust can be time-consuming. Some trusts require extra attention to ensure that the beneficiaries receive their full benefits.
For example, a special needs trust must be carefully managed to ensure that the beneficiaries receive their distributions in a way that does not cause them to lose their governmental benefits.
If the beneficiary of a special needs trust is a minor or is incapable of safeguarding their own interests, your trustee will need to communicate and cooperate with other caregivers.
Verifying whether your professional trustee has the time and willingness to make regular contact with these advocates is essential.
Suppose your trust has If-Then statements in response to milestones. In that case, the trustee must be familiar with these milestones and make distributions appropriately.
6. Does your professional trustee prioritize trust management?
If trust administration is only a small part of your professional trustee’s business, they may not allow enough time to handle the required tasks, including communicating with the beneficiaries and ensuring bookkeeping is kept current.
7. Does the trustee have a succession plan?
Your trust document will name a successor trustee in the event your professional trustee is unable to continue administering your trust.
However, it is worth checking to see if they also have a succession plan in place, especially if you have minor children.
As soon as you have your trust plans ready, notify your professional trustee of your intent to name them as trustee, even though they will not need to take action until you can no longer manage your trust or pass away.
A trustee has no obligation to accept this role. Serving as a trustee comes with many responsibilities and demands.
Notify your trustee to ensure they accept the job and understand their responsibilities.
If your professional trustee declines, you can appoint another trustee now rather than forcing your beneficiaries to go to court to resolve the matter, a situation that can be expensive and time-consuming.