Creating a trust, while you’re still here, generally involves your intention to preserve the assets you’ve accrued for your loved ones. But benefits from a trust’s preservation might not be possible if the trust is not maintained properly. Even worse, familial relationships can suffer permanent damage during what might be called routine maintenance due to the potential for miscomprehension of just what that ‘routine maintenance’ involves.
NOTE – Read more about Trusts in these select past posts:
There are myriad responsibilities for the person you select to be your Trustee one of which is to ensure that proper paperwork is completed correctly and filed in a timely manner —both annually and throughout the term of the trust.
When establishing a trust, the creator might feel naturally inclined to name a responsible, trusted family member or a friend as your successor trustee. Before you make this decision you should consider:
1. Family conflict. Aside from challenges associated with trust administration that the trustee might face, personal conflicts among family members could surface. Issues of favoritism or resentment might suddenly appear in a family that had never experienced them before. Hiring an experienced third-party corporate trustee can separate family from administration and help prevent those potentially damaging internal conflicts. Family dynamics have an interesting way of changing when the potential for misunderstanding and misperceptions arise through circumstances associated with Trusts.
2. Liability. The trustee is the party responsible to beneficiaries for proper management of trust assets. Should the trustee make a mistake in trust administration, beneficiaries could personally sue the trustee. This is true even under circumstances when the trustee acts with the advisement of a hired professional adviser. Picture the outcome if your beloved family members pursue this course of action; not pretty.
3. Time-consuming. As mentioned above, trustees are required to maintain and protect detailed records pertaining to the trust. Bill payments and critical tax deadlines might be a burden on a family member. Other duties that demand a trustee’s time include keeping beneficiaries informed, compliance with changing trust laws, accounting reports, and more. The time involved in basic trust administration might be overwhelming for a family member. Paying a third-party corporate trustee to perform these duties not only exponentially increases your chances of having them performed professionally but also alleviates any potential misunderstandings between family members no matter what their level of competence.
For individuals who are concerned about the actions of a trustee or who want greater flexibility in the event a trustee needs to be replaced, ask your asset protection attorney about trust protectors. Trust protectors are defined as power holders: “A person other than a trustee with power to take certain actions concerning a trust.” Provisions for naming a trust protector can be included in new trusts or, in some cases, added to existing trusts. These modern tools help remove and replace trustees without a lengthy court process, among many other benefits.
Choosing a non-familial trustee helps address the concerns above. This decision also offers the trust creator the opportunity to select an experienced and knowledgeable accountant, trust attorney or other professional to manage administration.
What if the trustee becomes incapacitated or dies before the trust term is complete? Learn about successor trustee responsibilities and discuss the possibility with an estate or asset protection attorney.