When you create a trust, choosing a trustee is one of the most important decisions you will make. If you create a revocable living trust—that is, a trust that you establish during your lifetime and can revoke or amend—you may opt to act as trustee for your trust, retaining the full control over and benefit of the money and property it holds. However, what happens if you develop a health issue or are injured in a car accident and are unable to manage your own affairs? With today’s longer life expectancies, it is much more likely that you will experience dementia in your later years, making it impossible for you to handle your own finances. And what will happen when you pass away? It is crucial that you name a successor trustee (and an alternate in case the first successor is unable or unwilling to serve) who will step into the role of trustee to manage the trust on your behalf if you become incapacitated or die.
There are certain characteristics you should look for in any trustee. They should be trustworthy and responsible, capable of making wise financial or investment decisions, and interested in carrying out your wishes as expressed in your trust document. Depending on your particular circumstances, it may be prudent to name different trustees to serve at your incapacity and at your death. On the other hand, some may prefer to have the same trustee serve in the event of both incapacity and death.
Different Trustees at Incapacity and Death
During Incapacity
During your lifetime, you are typically the beneficiary of your revocable living trust, so you may prefer to have a spouse, child, or other close relative serve as your trustee if you become incapacitated. Not only will they have a legal duty to act in your best interest, they are also among the people who know you and your needs best, love you, and understand your wishes. They will have your best interest at heart and will ensure that your affairs are handled in a way that is most beneficial for you. Another possible benefit is that, although a family member who serves as trustee is entitled to charge a reasonable fee for the work they perform in that role, they may forgo compensation. Importantly, because there often are no other trust beneficiaries during your lifetime, there is no risk that a trustee who is also a family member will show or be perceived as showing favoritism or partiality between beneficiaries.
Tip: You should consider naming the same person you have chosen to act as your agent under a financial power of attorney as your trustee. While your trustee will manage the money or property held in your trust, your agent under a financial power of attorney is typically authorized to manage nontrust property, pay bills, enter into contracts, or engage in other financial transactions on your behalf. You may choose to make the financial power of attorney effective immediately, or in some states, only upon a determination that you have become incapacitated. In any case, the person you choose to act as your agent will need to meet the same criteria you should use in naming a successor trustee: your agent should be someone you know is honest, reliable, and capable.
At Your Death
When you pass away, you are no longer the beneficiary of your trust. Instead, the trust’s beneficiaries are the individuals or organizations you have designated in your trust document to receive distributions from the trust after your death. Other considerations may come into play in choosing who will serve in the role of trustee at that point. For example, if you name your spouse or child as your successor trustee, it may be difficult for them to take on the responsibilities of that role at a time when they are grieving and distraught.
In addition, if there have been any family rivalries or disharmony, naming one of the children as trustee may create tension, as the other children may suspect that the child who is trustee will not carry out their duties in an unbiased way. These tensions could also occur in blended families. For example, if you have children from both your previous and current marriage and you name your current spouse as trustee, your children from your first marriage may suspect that they will not be treated fairly. This situation could even lead to disharmony for families who have always gotten along well in the past.
To avoid family squabbles, you may want to name someone whom you can count on to act fairly and impartially—perhaps a good friend, a trusted business associate, or a professional trustee—to act as your successor trustee upon your death.
Same Trustee at Incapacity and Death
If you think there is little risk of family disunity, you may opt to have the same person serve as successor trustee during your incapacity and at your death. There are some definite benefits to this approach. First, if only one person will serve as your successor trustee, less preparation is necessary for the occurrence of either circumstance: instead of bringing two individuals up to speed on your affairs, you only need to involve one person who knows they are next in line to serve as trustee. Having one individual serve as successor trustee will avoid the need to transition from one trustee to the next if you become incapacitated before your death, making management of the trust more seamless. Because the trustee will already be in that role, there will be no sudden need for them to assume a new, potentially stressful role when you die.
We Can Help
Determining who will serve as your successor trustee is a crucial decision when you create your estate plan. Whether you need to decide between having the same trustee or different trustees at your incapacity or death, to name more than one trustee, or to appoint a professional trustee, we can guide you to make the best choice for your particular situation. Our aim is to help you achieve your goals and avoid conflict in your family after you pass away. Call us today to set up an appointment so we can advise you as you make this and other important decisions about your estate plan. Call Santaella Legal Group, serving all of California, at (925) 831-4840, or reach out to us here.