Mary Owens: Choosing the right trustee option
January 7, 2018
Last month I briefly outlined many of the "heart" issues to consider when choosing a successor trustee for simple estates with a trusted child living locally. You are so blessed if you have willing, loving and respectful assistance close at hand.
For many planning their financial affairs, these options are not available to them. Either their estate is too complex for their trusted children or other loved one to administrate by themselves, or those they believe could handle it live too far away to make their appointment as a successor trustee practical.
To begin exploring the solutions, the causes of the issues creating the indecision must be addressed. The most common reasons for looking outside of immediate family and friends are as follows:
Children do not get along and placing the burden on one or two children as successor trustee or successor co-trustees is anticipated to be too stressful of an environment of even willing and financially competent children.
Immediate family members do not exist.
Your estate has an operating business that cannot be readily shut down without substantial financial harm to your estate, devastation to employees, or exposes the estate to unfulfilled contractual liabilities. In many cases, new individuals may have to be hired to continue to operate the business until it can be sold.
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Your estate owns a business with a catastrophic succession plan in place that is complex and takes special skills to administrate properly.
Your estate owns a great deal of real estate that requires ongoing active management.
The estate may be dealing with an active lawsuit at the time of death or during periods of your potential incapacitation.
The estate is of substantial size and complexity that it would require full time or near full time activity of a successor trustee in order to administrate properly.
Picking a successor
The first two issues are the vast majority of the folks looking for options in their estate plan. In both of these cases, I highly recommend professional trustees be the successor trustee and trusted friends of family members be appointed to the Health Care Directives.
There are several alternative structures to consider when using a professional trustee as a successor. If you have a trusted family member or friend, consider appointing the known trusted person as co-trustee with a professional trustee.
The professional trustee can act as a buffer for the known trusted person, handling the communication and interaction with the difficult family members while allowing the known trusted person to handle a large portion of the tasks that need to be done locally.
There are many tasks involved in the administration of the estate. Your estate planning documents can be drafted in such a manner that allows known trusted persons and a professional trustees to divide tasks among them in a manner that allows for the maximum efficiency and utilization of necessary skills sets to get the job done with the least amount of complications and effort.
In all cases where there are difficult or unreasonable family members present, engaging and utilizing a good estate planning attorney is essential, even when a professional trustee is involved. Family members can have entirely unreasonable expectations concerning the length of time necessary to administrate an estate.
They may demand inappropriate early estate distributions or present other demands that are unreasonable. Legal council should be the hired professional who handles these types of difficult situations and coordinates the distribution of all required legal notices.
In searching for trustees alternatives, do not underestimate the need to have available competent legal counsel no matter who the successor trustees may be in the future. Make sure all potential successor trustees have met this person in advance of appointment to any position.
Allow the known trusted person to ask questions and understand the role that the legal counsel can provide in alleviating unnecessary tensions and complications. Professional trustees have the experience and training to already grasp the importance of legal counsel.
Known trusted persons usually do not understand the critical importance and need to be advised in advance by engaging and involving estate attorneys to advise them.
Plan ahead & communicate
If you are considering a professional trustee option for your family solution it is important that you inform the professional trustees of your family concerns or other potential issues in advance. Do not appoint a professional trustee in any situation where you either did not ask the trustee for their permission to appoint them to your estate or obtain an understanding of what types of estate they will and will not accept.
You do not want to put yourself in a position where you named a professional trustee and at the moment of greatest need they decline the position because you failed to get their permission before their appointment.
Professional trustees have the reasonable right to understand what they are taking on and where to find the needed documentation of your estate and your affairs in advance. They should not be expected to agree to administer an estate without having a conduit to inform them of the assets, liabilities, and other issues of your affairs. They cannot administer what they do not know exists.
As a professional trustee, I received a phone call in the middle of the night informing me of a loved ones passing. I did not recognize the name, did not know of the person, where they had lived, what they owed and where their estate planning documents may be located.
They did not ask me permission before naming me in their documents. Do not place any future trustee in this position. It places both the loved ones and the professional trustee in a most difficult position.
Next month I will be discussing options for estates that own businesses, have numerous real estate holdings, or have complex time consuming estate affairs.
Mary Owens, CPA, MS, Principal, President of Investments, Branch Manager RJFS with Owens Estate and Wealth Strategies Group, located at 426 Sutton Way Suite 110 Grass Valley | 530-272-7500. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Owens Estate and Wealth Strategies Group is not a registered broker/dealer and is independent of Raymond James Financial Services. The information provided does not purport to be a complete description of the developments referred to in this material, it has been obtained from sources considered to be reliable but we do not guarantee that it is accurate or complete. Any opinions are those of Mary Owens and are not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
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