How to Pick a Trustee

Clients frequently choose to use trusts in their estate plans, and once they and their estate planning attorney have made that decision, they’ll need to decide who to name as trustee or trustees. Picking a trustee is not always an easy process, explains Kiplinger in the article “Guidance on Choosing the Right Trustee (or Trustees) for Your Estate.”

Serving as a trustee creates many duties under state law, including acting as a fiduciary to the trust. That means the trustee must be impartial about their own interests, put the beneficiary’s interests and well-being first and be prudent with how they invest funds. Law prohibits a trustee from self-dealing, although depending on the scenario, the trustee might also be the beneficiary.

Here are a long series of questions that will help to assess a person’s ability to serve as a trustee:

  • Will the person be able to separate their personal feelings and interests from those of the beneficiaries?
  • Will all parties be treated fairly, especially if your children are not also your spouse’s children?
  • Can your trustee manage finances and investments?
  • Is there any risk that your trustee will be tempted to take a risk to obtain money at the expense of beneficiaries, including their own money problems or addiction?
  • Are there concerns about the health, age or capacity of the person?
  • Will a child who is a trustee be fair to the other siblings, even if they are step siblings?
  • Will a child be able to stand up to the other siblings?
  • Will the person who is managing work and family have the time to take on the responsibilities of the trustee when they will likely be needed to do so?
  • Does the person understand the family dynamics?
  • Has the person served as a trustee before?

Another common problem is people are unsure of who to ask in their family or where to look for back-up trustees, especially where they might not feel comfortable with those closest to them.  With that in mind, here are some potential people to consider, although their suitability will vary greatly in different circumstances:

  • Spouse
  • Parents
  • Children, step children, and grandchildren
  • Siblings and step siblings, nieces and nephews, cousins
  • Spouses of children, step children, siblings or other close family
  • Friends
  • Neighbors
  • Members of social groups, fraternal organizations, religious communities or other similar groups
  • Financial Professionals (not necessarily financial planners who likely aren’t permitted to, but CPAs or some attorneys for example)
  • Professional Trustees (e.g. a bank or other similar trustee)

I should note as well that I’m focusing on trustees in this article, but many of these same considerations apply to other fiduciary roles.  See here for more information on the other roles to consider.  https://www.galliganmanning.com/the-difference-between-an-executor-a-trustee-and-other-fiduciaries/

There is no one size fits all approach to picking a trustee, but hopefully this will provide guidance on who is right for you.

Reference: Kiplinger (Sep. 8, 2020) “Guidance on Choosing the Right Trustee (or Trustees) for Your Estate”

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Estate Planning with a Business

Estate planning with a business addresses owner succession, protecting assets and the smooth operation of the business.

Estate planning with a business is different. If you have children, ownership shares in a business, or even in more than one business, a desire to protect your family and business if you became disabled, or charitable giving goals, then you need an estate plan attuned to those needs. The recent article “Estate planning for business owners and executives” from The Wealth Advisor explains why business owners, parents and executives need estate plans.

An estate plan is more than a way to distribute wealth. It can also:

  • Establish a Power of Attorney, if you can’t make decisions due to an illness or injury.
  • Identify a guardianship plan for minor children, naming a caregiver of your choice.
  • Coordinating beneficiary designations with your estate plan. This includes retirement plans, life insurance, annuities and some jointly owned property.
  • Create trusts for beneficiaries to afford them asset or divorce protection.
  • Identify professional management for assets in those trusts if appropriate.
  • Minimize taxes and maximize privacy through the use of planning techniques.
  • Create a structure for your philanthropic goals.

An estate plan ensures that fiduciaries are identified to oversee and distribute assets as you want. Estate planning with a business especially focuses on managing ownership assets, which requires more sophisticated planning. Ideally, you have a management and ownership succession plan for your business, and both should be well-documented and integrated with your overall estate plan.   See here for a deeper dive into business succession planning.  https://www.galliganmanning.com/business-succession-planning-in-your-estate-plan/

Some business owners choose to separate their Power of Attorney documents, so one person or more who know their business well, as well as the POA holder or co-POA, are able to make decisions about the business, while family members are appointed POA for non-business decisions.

Depending on how your business is structured, the post-death transfer of the business may need to be a part of your estate planning with a business. A current buy-sell agreement may be needed, especially if there are more than two owners of the business.

An estate plan, like a succession plan, is not a set-it-and-forget it document. Regular reviews will ensure that any changes are documented, from the size of your overall estate to the people you choose to make key decisions.

Reference: The Wealth Advisor (July 28, 2020) “Estate planning for business owners and executives”

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