Being a trustee is a job

Dear Readers:

We’re going to step off of the beaten path of questions and answers and pay some attention to the questions that our clients and readers don’t always think to ask. Today, we are going to write about one of the biggest mistakes you can make in creating an estate plan - naming the wrong person as trustee or executor.

Many clients do not put much thought into it - some of the more traditional families tend to name the eldest male child as successor trustee. After all, he’s the prince of the family. 
We’ve learned the hard way that this isn’t always such a good idea.

The decision as to who your successor trustee (or executor if you just have a will) is critical. Being a trustee is a job. Some people are better at it than others. Some people can’t handle the responsibility or can’t really be trusted.

The job of a trustee is to manage a trust for the benefit of the beneficiaries, the people who will inherit your trust when you die. Selecting a trustee who doesn’t get along with the rest of the family, or one who isn’t very organized, or who can’t even manage his or her own money, is a recipe for disaster.

We have seen trustees (not our clients, mind you) pay out their shares while maintaining control of everyone else’s inheritance without authority. We have seen trustees fail to inform beneficiaries of the existence of a trust. We have seen trustees liquidate and distribute assets without providing any information at all to the beneficiaries other than giving them a check and claiming, incorrectly, that if the beneficiaries want an accounting, they’ll have to pay for it themselves.

You can imagine the effect of all of this. If there’s smoke, there’s fire. And there’s plenty of smoke when a trustee refuses to be informative and isn’t organized enough to even know for himself or herself what’s going on. The worst trustees are the ones who are both ignorant and arrogant. They believe they are correct in all things, when they are not, and they aren’t willing to listen. These are the trustees who create animosity in the family and who wind up getting sued.

Who should you pick as trustee? You want a trustee who is diplomatic - who tries to make nice with the beneficiaries and who won’t strike out against the beneficiaries who are not running on all cylinders. You want a trustee who is moderately organized. If one of your children is better at managing his or her own finances than the others, then that child may be a good candidate to be trustee. Finally, you want a trustee who is smart enough to understand that he or she can’t do it alone, if only because most people do not understand the legal requirements of managing a trust.

Len & Rosie