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Successor TrusteeWhen you are going through and deciding on the details for your trust, one of the most important decisions for you to make is appointing successor trustees.  Successor trustees administer your trust after you become incapacitated or pass away.  Preferably, this individual should have the following attributes or skills:

  • Trustworthy and responsible,
  • Organized, and detail-oriented, and
  • Strong enough to be dedicated to fulfilling your wishes even in the face of contention and pressure.

Unfortunately, it is still very easy for successor trustees to make mistakes, and it sadly happens very often.  This blog mentions five common mistakes that successor trustees make and how they can be avoided.

5 Mistakes Made by Successor Trustees

1. Faulty Record-keeping

Keeping good records is incredibly important.  If the trust is ever contested, keeping good records can help prove that the trustee is correctly administering the trust.  These records should be of income, distributions, and other aspects of the trust finances.  Also, the successor trustee should provide this information to the beneficiaries.  Poor record-keeping increases suspicion and likelihood that the trust will be challenged.  This disrupts family harmony and decreases the amount of money being passed on to the beneficiaries.

To prevent this mistake: The successor trustee should hire an accountant that the trustee knows and trusts to track finances.

2. Misunderstanding the Fiduciary Role

Successor trustees have a fiduciary duty to the trust beneficiaries, not the person who established the trust.  This duty means that the successor trustee can be legally liable to the beneficiaries in certain situations.

To prevent this mistake: Address the successor trustee’s duties in the trust document itself and help the trustee understand what their role is.

3. Not Collaborating Effectively with Your Established Financial Team

If your successor trustee does not communicate with the financial professionals that can help them administer your trust, problems such as inaccuracy, financial loss, and misunderstandings can arise.

To prevent this mistake: You should help your successor trustee meet and know your accountant, financial advisor, attorney, and any other financial professionals that can help with administering your trust.

4. Failing to Discuss Compensation

Paying the successor trustee can be an awkward conversation, especially if the successor trustee is a family member or a friend.  If you do not have this conversation, though, the successor trustee may come to hate being the trustee if the trust administration proves to be difficult and they are doing it for free.

To prevent this mistake: Address the topic of trustee compensation in the trust document and inform the trustee directly if you feel the need to do so.

5. Failing to Remain Objective

Ultimately, estate planning is a family affair, and many successor trustees are family members.  While this is not a problem most of the time, financial disputes can happen even in tight-knit families.  It can become very difficult for the successor trustee to be neutral when trying to resolve these fights.  That difficulty can make the successor trustee appear to play favorites or appear to being unfair.

To prevent this mistake: Your successor trustee needs to be objective and have the ability to be neutral and administer your trust, no matter the circumstances.  If you are unsure if any possible successor trustees can do this, you may want to think about appointing a corporate trustee or someone who is not emotionally connected to your family or estate.

Conclusion and Continual Update and Education Program

Choosing the right successor trustee is just as important as your distribution provisions, or any other provision, in your trust.  I invite you to contact The Rains Law Firm or schedule a complimentary meeting to discuss other considerations when selecting a successor trustee.

Also, one option that you can adopt that can proactively address all of these issues is The Rains Law Firm’s innovative Continual Update and Education Program.  Ask how this Program can help your successor trustee administer your trust effectively and efficiently.