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Who is your trustee?

December 5, 2016

 

 

Trusts are not just for wealthy folks but can be a great way to pass assets on the next generation outside of the probate courts. They can make sure that your money or house goes to who you want, which can be critical in today's blended families and multiple marriages. You can have your investments go into a revocable trust and your current spouse is able to live off the earnings and when they pass, the remaining balance goes to your children from your previous marriages. Or perhaps you have a special needs child you want to make sure is taken care of when you are no longer able to. A trust can assist with that.

 

But who is going to be the trustee? Generally, while you are alive, you serve as your own trustee and if you are married you may have your surviving spouse act as the trustee. But who is the “Successor” trustee? Who is going to handle the trust when you are both gone? Many people make one or two of their children as the successor trustee. But this may not be the wisest step.

 

You have to evaluate the child’s ability and desire to handle this role upon your death. The successor trustee will have to have a good working knowledge of investments, legal issues, and taxes. The trustee has to handle distributions from the trust, decide if they are in alignment with the original trust document, file the tax returns, and handle the investments.

 

Your child may live in another state by the time you get old. Can they fly back and forth to handle all of the affairs? Many parents have never consulted the child about serving in this role. If you have a trust, I suggest you have an open and frank conversation with the person you nominated as successor trustee. Make sure they are willing to serve and feel they have the skills to manage the trust.

 

And what if they aren’t? Or you don’t have close family? There are corporate trustees who can step in and act as the trustee. They will follow the instructions of the document you drafted and make sure that your wishes are followed. Of course, this does cost money but it may be smarter options for some families and reduce squabbling. Generally, the costs range from about .50% to 2.0% annually to have corporate trustees.  It may be worth the cost for peace and harmony to be maintained!

 

 

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