Choosing a Trustee: The Relationship Matters
Written By: The American Academy of Estate Planning Attorneys
There are many factors to consider when selecting someone to serve as your trustee. This includes but is not limited to: age, maturity, responsibility, location, and of course, financial acumen. However, many people overlook that the relationship with that person matters as well.
A trustee is staffed with the responsibility of managing and distributing assets in accordance with your wishes. In accomplishing these tasks, the trustee must interact with beneficiaries, advisors, and other fiduciaries.
In fulfilling his or her duties, the trustee often has broad discretion. For example, a trustee is given the discretion to make distributions to beneficiaries based upon the needs of the person. There can be some friction between a trustee and the beneficiaries as a result of this discretion. Unfortunately, this can lead to more stress on top of an already strained relationship.
Here is an example: the Knuth’s appointed a family member as trustee of a Family Trust set up for the benefit of other family members. The tensions escalated and the beneficiaries went into the trustee’s home and placed a listening device under his bed. Two days later, he and his wife discovered the bug. The couple sued the beneficiaries for invasion of privacy and trespassing, eventually being awarded $475,000 in damages by a southern California court.
While there is nothing you can do to eliminate the possibility of friction between beneficiaries and trustees, you can reduce the possibility by avoiding problematic situations, such as one sibling serving as trustee for another adult sibling or a subsequent spouse serving as trustee for children from a prior marriage.
Working with Others
Along with beneficiaries, trustees must also work with advisors and other fiduciaries. From co-trustees to the guardians of minor beneficiaries, there are many other parties that could come into play. It is wise to consider these relationships, as feuding fiduciaries can wreak havoc on an otherwise well thought out estate plan.
In the event that the only logical choice as trustee may lead to friction with another party, you can reduce the risk by lessening the discretion granted to the trustee. This diminishes both the flexibility of your plan and the likelihood your goals will be met.
To protect against all trouble, it may be best to name a bank or Trust company as a co-trustee. This combination can work well, as the individual trustee knows the family dynamics and the beneficiaries on a personal level, and the bank is unbiased and not embroiled in family politics.
In the event that your family history is littered with disputes, it may be best to name a bank as the sole trustee. This may not be the popular choice among family members, but it can help avoid trouble after your death.
A carefully selected trustee is critical to implementing your estate plan. An attorney who focuses his or her practice in estate planning and who is sensitive to family issues can help you design a plan and select a trustee to achieve your goals.