The trustee you name to take your place will have significant legal and fiduciary duties which will require time and knowledge. The Forward Looking Trustor will ensure the successor trustee is willing and able to effectively handle such duties.
- Questions for you to consider
- Trustee duties
- Corporate trustee vs. family member trustee
- Advantages of delayed distributions
- Dealing with Incapacity
Questions for you to consider:
- Does your trustee have time to serve as trustee?
- Does your trustee have the legal understanding to read, understand, interpret, and administer your trust agreement?
- Does your trustee understand all of the tax (estate and income) issues that are involved with your trust?
- Will your trustee be able to make decisions impartially?
- Will you put the trustee in a difficult situation that could create family conflict?
- Is your trustee able to adapt their services to your specific trust and family situation?
- Does your trustee understand the fiduciary duties and liabilities?
Trustee duties:
- Hold legal title to trust assets
- Impartial investment, management and distribution of trust property
- Balance interest of current beneficiaries and future beneficiaries
- Assure proper investment and management of trust assets (Prudent Investor Rule)
- Protect trust assets from creditors, ex-spouses, etc.
- Safekeeping of assets and ownership documents
- Distribute trust income and/or principal prudently and according to the Trust Agreement
- Make discretionary decisions regarding distributions to beneficiaries regarding health, support, special needs, addiction problems, etc.
- Loyalty to beneficiaries
- Legally understand and interpret trust agreement
- Resolve disputes between beneficiaries
- Account for trust assets, trust principal and income
- Keep detailed records and account to beneficiaries
- Prepare and file tax returns with the IRS and send appropriate tax documents to beneficiaries
- Maintain confidentiality of trust assets and beneficiaries
- Assist with any needed trust reformations
- Communicate with the beneficiaries regarding the trust estate
- Terminate the trust properly
Corporate trustee vs. family member trustee:
Traditionally, the two options have been naming either a (1) family member or (2) a bank.
Family or Friend:
- BENEFIT: Loyal, trust, inexpensive, understanding of family situation
- CHALLENGE: However, they possess less knowledge of trust law, income and estate tax laws and its easy to question their impartiality and future capacity (age, sickness, death). Also, their inherent position of conflict can create a difficult family situation and time commitment
Bank:
- BENEFIT: Experience, perpetual
- CHALLENGE: Impersonal, expensive, employee turnover, conservative investing, slow to act through committees, don’t accept irregular assets
PFTC was formed to fill the gap and to blend the positive aspects of a family and bank trustee. Our principals spend time directly with family members to gain knowledge of the family situation beyond what is written in the trust agreement in order to adapt our services to best fit your trust estate and serve your beneficiaries with the utmost care. We often develop relationships with trustors years before we become trustee to gain a better understanding of what they want us to do when we replace them as trustee.
Advantages of delayed distributions:
- Avoid unwanted squandering of trust assets by your children due to young age, substance abuse, gambling and rash investment decisions.
- Take care of financial needs of surviving spouse.
- Create Greater asset protection against potential creditors of your children.
- Ensure that trust assets do not become community property that can be lost through divorce.
- Distribute trust assets only when needed or when other professionals believe it is wise.
- Provide inheritance and financial assistance for multiple generations, including your grandchildren.
Dealing with incapacity:
As people age, their ability and desire to deal with financial and legal matters decreases. Sadly, older people are often easy prey to those who want to take their money.
You should review your trust agreement to ensure there is an easy way for a successor trustee or a co-trustee to step in and help protect the trust estate from predators. Making such amendments while you are able to think clearly can avoid many headaches and arguments down the road.
We often step in as co-trustee with the surviving spouse so that we can help protect the trust estate and deal with the detail or complicated financial and legal matters, while still having the surviving spouse maintain some control as co-trustee.