Selecting Trustees and Executors - Some Considerations and Ideas
But the selection of trustee (or in the case of a will, the executor) is extremely important. Few issues are more important. Failing to select the correct person can, in fact, compromise every other aspect an otherwise excellent estate plan.
I was previously involved in a number of cases where the fiduciary stole money belonging to the estate (actually, both cases involved conservators rather than trustees or executors -- but the idea is the same, as all are considered "fiduciaries", or persons with control and who have a high legal obligation to a person or to an estate).
In one instance, over time, the conservator stole over $11,000 from an account he was entrusted to manage. What did he use the money for? To help pay for his daughter's medical education. In another instance, a conservator stole money from an estate account by making regular ATM withdrawals at the maximum $300 per day limit.
I never learned exactly what he did with that money.
So, what should you look for when selecting an executor or trustee? Here are some ideas:
Don't assume that flaky or formerly-flaky family members will or have changed their stripes. You are entitled to your skepticism: Never assume that dishonest members have suddenly become honest. Maybe they are, but that doesn't entitle them to the keys to Fort Knox.
Don't assume that family members will remain nice and friendly after the funeral. It's amazing what money does to people.
Select individuals who can and will follow directions. Although detailing the various duties of executors and trustees are outside of the scope of this article, this is essential: Documents such as court orders and trust documents must be both read and complied with. This requires some sophistication on the part of the executor or trustee.
If possible, avoid avoiding appointing multiple fiduciaries. In my view, appointing multiple fiduciaries is done (frequently) as a way of avoiding tough decisions at document drafting stage -- like appointing co-trustees, or co-executors. If two or three are in charge, you are inviting a fight, and perhaps costly court intervention.
Make sure that your estate planning documents are professionally prepared. I realize that there are many products in the electronic marketplace, but nothing (in my view) beats attorney prepared documents. A live person will be more likely to "flesh out" issues more effectively than a computer spitting out canned legal documents. That $300 or $400 you save now might not be worth it in the long run.
Consider a professional fiduciary or trust company. However, this option is an expensive one, and is usually only affordable to larger estates.
Consider this alternative: Require a bond. Your initial reaction might be to forget the bond and to save your estate the premium expense (if avoiding it is permitted by state law). But while bonds do indeed charge a premium, they are cheap insurance for the trust or probate beneficiaries.
Finally, consider your family situation. I realize that this sounds like a cop-out, but each family does indeed have its own dynamic. For example, unless there is a viable alternative, I would generally avoid busy or stressed out family members for selection as trustee or executor.
Another example: If you have a contentious family, you might need to appoint an outsider not easily influenced by the day-to-day drama. If you have a long term trust (for example) for the benefit of a child with a substance abuse problem, the trustee should have a strong personality. The trustee should be able to confidently say "no," and to act in accordance with your instructions as provided in the trust agreement, as well as in the long-term interest of the beneficiary.
Of course, this is only a partial list of considerations. In a way, there are as many considerations as families. However, following these guidelines (and they are not rules, just guidelines) may save your family money and added stress during a difficult and emotional time.
Related Tags: estate planning, trustee, trustees, executor, executors, trust trustee beneficiary, beneficiary
You can meet your financial and estate planning goals and needs! A licensed attorney, financial planner and owner of Stratton Financial and Estate Planning, Larry D. Stratton is in a position to coach, advise, and plan for your future. He is also the senior associate at the law firm of Hausman & Sosa, LLP, located in Tarzana, California. Larry Stratton is a member of the Financial Planning Association, and speaks on estate and financial planning topics in Southern California.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- Facts About Home Equity Line Of Credit Everyone Should Know
Home Equity Lines of Credit (HELOC) provide homeowners with a ready source funds for major planned a - Single Member LLC- Charging Order, Creditor Claims, Pass-through
Recently I've run across some significant issues with the single member LLC's with courts handing do - Fraudulent Conveyance, Civil Conspiracy, Uniform Fraudulent Transfer Act
Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041: ". - Charitable Remainder Trust - Having Your Cake & Eating It Too
Using this method of charitable giving, you can actually give your assets away and keep them. It's l - Protect, Provide & Profit - A Family Limited Partnership
A Family Limited Partnership is becoming one of the most popular methods to pass the equity in a lar - Living Will
A living will is a legal document that you create to prepare your medical care and finances in the e - Spendthrift Trusts - Checks And Balances For Dysfunctional Beneficiaries
Spendthrift trusts are rapidly becoming a key estate planning tool for families with one member who' - Offshore Annuity, Deferred Variable Annuity
An Offshore Annuity works very similar to a deferred variable annuity. The owner pays into the annui - Estate - She Came Out Of Nowhere
If you'd hit her in the passenger door, you probably would have killed her," the officer told me as - Estate - When Friends And Family WANT Your Money
Few situations have a greater potential for problems as when dealing with money and relatives. If yo
Most viewed articles in this category:
- Why a Durable Power of Attorney is "Durable" and Why It's Great for Estate Planning
English common law understood that agents were sometimes needed in business and commerce. The presi - Special Needs Children Need a Special Needs Trust
How to Provide for the Special Needs Child.Life for the parent of a Special Needs child often involv - Getting the Right Inheritance - Estate Planning Through a Family Limited Partnership
A Family Limited Partnership (FLP) is a powerful tool that you can use in estate planning. An FLP ca - Children, Guardianships and Wills: Estate Planning for Young Families
Consider this scenario: Both you and your spouse are young with two small children. You don't make - What is Values-Based Wealth Planning
Between the years 1980 and 2030 it is estimated that the largest transfer of wealth from one generat - Setting Up a Special Needs Trust for a Disabled Relative
Many of us have a family member or close relative with a disability. We'd like to leave a portion of - Why Everyone Needs At Least a Living Trust
There is one thing we all share in common: our days on this planet will come to an end - probably by - Medicaid and the Living Trust
You've probably gotten a postcard or seen an ad for a seminar on "Living Trusts" and all the benefit - Asset Protection - Why Do You Need It
By the time people reach their forties, many have a growing family and responsibilities. Many alread - The Inheritor's Trust
Many times Baby Boomer client has parents who have a fair amount of money, as does the Boomer client