Thought Leadership

Help Clients Pick the Right Successor Trustee

Without encouragement from trusted advisors or loved ones, few seniors will take the time to arrange for someone else to handle their financial issues when they can no longer fully care for themselves.

It’s an easy decision to put off, because it’s emotionally stressful for them to consider losing their cognitive abilities and independence to financially care for themselves. Managing their own affairs is something most clients did for themselves all their lives, and it’s difficult for them to imagine not being able to do so.

Some seniors lack a sense of urgency about handling this decision until they’re experiencing a loss of cognitive ability that is clearly recognizable. But the absolute smartest time to settle this issue is before a change becomes medically necessary.

When our firm creates a Revocable Living Trust (RLT) for a client, one of the first decisions that we help clients make is choosing someone trustworthy to assume the role of a successor trustee – the person who manages the client’s trust and assets when the client dies or becomes incapacitated.

Making this decision is not as simple as picking a favorite aunt or an eldest child. Choosing can be difficult. That’s why we’re sharing some basic advice on picking an after-death or disability trustee.

The initial questions a client must answer are:

•    Who does the client want to be in charge?
•    Are all the correct planning documents in place?
•    Does the client have a written investment policy?
•    How will the transition occur to move authority to the successor trustee?

Role of a Successor Trustee

The successor trustee manages the assets in the trust in the best interests of the beneficiaries (which includes your client in the event of incapacitation) and makes decisions on how assets are invested or released.

Clients need assurances that the person they choose is responsible, will carry out their wishes, make sound judgments and seek professional advice on managing the trust.

Good Candidates

Typically, this role is often assigned by clients to a spouse, relative, close friend, business associate, professional advisor or a corporate fiduciary. Sometimes, co-trustees are chosen from a combination of candidates.

A relative can be a great choice if he or she:

•    Is competent to handle finances and will follow the trust’s instructions.
•    Has time and interest to take on the role.
•    Will avoid family conflict by being unbiased and unemotional when making decisions.

It can also be wise to name a corporate fiduciary as the successor trustee. Some RLTs are complex or may be designed to benefit heirs for many years to come. Trust companies and banks are regulated by government and can manage assets for decades. Their advantages include:

•    They don’t die or become incapacitated.
•    They act objectively in following the Trust.
•    They keep detailed records and have estate administration, tax and investment expertise.

Sometimes a professional who is familiar with the client’s estate plan is a good choice, providing there is no conflict of interest. This could be a financial advisor, an estate planning attorney, a tax professional, or a combination of these professionals.

Regardless of whom your client chooses, the basic elements of a good successor trustee are the same: integrity, good judgment and objectivity.

We hope this information is useful to you and helps your clients and their families. If you have a specific case or a question, please don’t hesitate to call our office.