As I consult with individuals and families who are creating trusts, or re-thinking the trusts they created in the past, the topic of discussion that garners the most time and attention is who they will name as Successor Trustees. For most people, there is a predisposition to name someone within the family – such as a child, parent, sibling, or an aunt or uncle. Many have never considered using someone outside the family and, particularly, a professional.
The preference for family members is somewhat cultural. For hundreds of years, people have believed that they are bestowing an honor or they’re making an expression of gratitude and appreciation in naming someone within the family. In fact, many worry, when they are considering family members, that if someone from the family is not named at the top of the list, they will “feel bad.” So, even when the oldest son or daughter, is not really the best qualified, parents will still put Johnny or Susie at the top of the list because, again, they don’t want this person to feel bad. To compensate, say they have five children, they will name all of the five children as “Co-Trustees” just to avoid the perception that someone will feel bad. During our consultations, I try to point out, using the backdrop of 25 plus years of experience, that the notion – that it is an honor, privilege, or expression of trust – to be named as Successor Trustee, is only partially accurate, and it is often not accurate at all. The truth is that when you name someone to the trusted position of Trustee or Executor, you are imposing a “fiduciary duty” which carries with it legal responsibilities that, if not performed to a certain legal standard, can create liability upon that person.
For example, a Successor Trustee of a trust or the Executor of a will has a duty to act in the best interest of the beneficiaries. That is a pretty far-reaching duty. Land and real estate must be sold at fair market value, and it must be sold to a “qualified buyer” who is not likely to default if there is any financing being provided. Likewise, when selling securities, they are to be sold at the best price possible. Tax returns need to be prepared, prepared accurately and completely, and filed according to prescribed deadlines. Financial statements should be prepared showing the Beneficiaries, what the Trust or the Estate inventory is – assets, liabilities, income and expenses, and the accounting should be prepared at least annually and, possibly, more frequently.
That is just a sampling of the responsibilities that are involved, and they cannot be done in a haphazard way. Truthfully, they need to be done professionally, and that begs the question:? Should an amateur, who happens to be a family member, be sitting in this saddle, or should it be a professional? While I do not totally advocate professional trustees and executors, over family members, I really try to help my clients realize that there is a distinct difference, and that the responsibilities involved can be time consuming, frustrating, worrisome, and can be perceived, very shortly after the parent dies, as a burden and, certainly, not an honor or privilege. I have witnessed many, many Successor Trustees and Executors who have said, “I wish my mother/father would have picked someone else. I had a full life, job, marriage, responsibility to children, and life before this all was heaped upon my shoulders. I wish they would have just hired a professional to handle it.”
When I suggest to clients that they consider using a professional – which in Utah typically means a Bank Trust Department, CPA, or Attorney – they often bristle out of concern of “how much will that cost?” Before I go into much detail to answer the cost question, I am thinking, “whatever it costs, it is a small price to pay when you consider the toll that will be incurred or the non-monetary cost that will be borne by the family.” In my own family, my five children are very close, very good friends, and I have shuddered to think what would happen if one of them was to serve as the Successor Trustee or Executor. Would that erode, weaken or jeopardize their family relationship? What if the oldest child, who happens to be a professional and could very capably act as the fiduciary, didn’t sell the house or the securities the way the other four think he should? What if he was a little slow getting the accounting and financial statements prepared and distributed? What if his own personal and professional life caused some other delays in his work on behalf of the Trust of the Estate? What if he all of a sudden was driving a new car? What if he and his wife recently went on a vacation which, coincidentally, they had planned even before my death? Would suspicions begin to arise in the minds of the other children (and their spouses)? Would they start to “wonder” whether he was doing his job correctly and, worse, whether he was personally benefiting from his role as being in charge of mom’s and dad’s Trust and Estate? Would these suspicions hurt their relationship with him? Worse, would they begin to start making accusations, privately and among themselves, or even to his face?
Those are all things that I have seen happen in my years watching how the choice of the Successor Trustee and Executor actually plays out when mom and dad pass away.
This is a matter that you should approach with careful consideration.
Please feel free to give me a call and we can arrange a time to discuss the pros and cons of your personal situation and how you can come to a point where you feel that you have made the very best decision for your family, friends and relatives.