Since I prepared my first client estate plan in 1985 (the year the Kansas City Royals won the World Series), I have noticed two common two stumbling blocks when it comes to folks planning their estates.
What are they?
Selecting the "guardians" for their minor children and the "trustees" to manage the inheritance.
Today, we will consider the latter.
In short, a trustee is a "fiduciary" who is responsible for the assets of another and must exercise the highest degree of care while doing so.
Not too careful on the investment selection side, though. (Remember the parable of the "talents"?)
As "steward" over your stuff when you are incapacitated and for your loved ones after you are gone, selecting your trustee is a rather weighty decision.
Fortunately, two trustworthy sources recently weighed in on this weighty decision: Forbes and the Journal of the Missouri Bar.
In addition, I recommend a grand old chestnut from Kiplinger magazine.
The Forbes article is titled “How To Choose The Right Trustee For Your Estate."
The article provides an overview of the trustee's role, duties and standard of care before providing some practical pointers.
Here are a few of them:
- The trustee's responsibilities are neither quick nor easy; and
- It could take years of active engagement with the beneficiaries of the trust.
While a trustee need not be a whiz on the law and finance, the trustee needs to be above all things "trustworthy" and have common sense (which seems to be in short supply these days in so many ways).
The Forbes article also recommends selecting from trustee candidates who live in close proximity to the beneficiaries for practical reasons.
However, in this digital age of instant worldwide communication (think "Facetime" on your smartphone), I have found this to be not to be a deal breaker.
Above all, according to Forbes, your trustee should be someone with the energy and mental acuity to take on all responsibilities.
Estate planning is all about people first and stuff second.
Managing a trust is a big responsibility and requires a candid conversation with any potential trustee.
A trustee needs to know up front what is being asked of him or her.
In fact, once you have selected and appointed the trustee, Forbes encourages you to periodically re-evaluate your selection as circumstances can change.
Change is one of the only constants in life.
Have you and this friend/trustee grown apart or now is your parent/trustee too old to help? If yes, then it is time to reconsider a new trustee.
What about an institutional trustee? A trust company?
On the upside, a trust company will be unemotional and completely detached from the situation.
“There are definitely fewer family feuds when trust companies are involved,” the Forbes article observes.
For example, a trust company can be that built-in abominable "no-man" trustee when it comes to turning down an immature beneficiary and his demand for a Mazarati that "will do 185"! [A tip of the hat to Joe Walsh there.]
Additionally, trust companies can bring expertise and experience that a non-professional trustee can rarely match.
For every upside, there is a downside (or two, or three ....).
Trust companies charge a fee. This can vary, but customarily there are minimum fees and then they float as a percentage of the trust assets under management.
Typically, a friend or family trustee will usually not charge for their services.
Sometimes you get that for which you pay (I am not a fan of dangling participles).
On a very practical trust drafting matter, Forbes emphasizes flexible language in your trust instrument allowing you to "hire and fire" new trustees should circumstances change.
To really get down in the weeds when it comes to everything you need to know about selecting a trustee, click over to the May-June, 2015 issue of the Journal of the Missouri Bar.
While you will need Adobe PDF Reader to open the publication, the article beginning on page 142 titled "Apples to Apples: Three Steps to Choosing the Right Trustee" by attorney Jay E. Harker is one you will want to keep for reference.
Finally, one of the best two-page articles I have seen over the years on this subject is from Kiplinger magazine titled "In You They Trust" by Steven Goldberg. This is another article you will want to keep handy.
When it is time to prepare your trust, an experienced estate planning attorney can help you through the entire process.
So, how do you find an "experienced" estate planning attorney?
Ask around AND do your own due diligence research.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
References: Forbes (May 19, 2015) “How To Choose The Right Trustee For Your Estate”; Journal of the Missouri Bar "(May-June, 2015, Vol. 71, No. 3) "Apples to Apples: Three Steps to Choosing the Right Trustee"; and Kiplinger (March, 2007) "In You They Trust"