Current Blatt Watch
March 31, 2016
Estate Planning: Who Can Be Your Successor Trustee
One of the major questions legal estate planning clients always ask me is who can be my successor trustee. In Florida there are specific limitations about who can be a successor trustee, but for purposes of this short list, I’m going to talk about who might make sense and how to determine who is the best trustee and successor trustee.
The first trustee of any revocable trust should be yourself. If you’re married and you have had a long-term relationship; the second trustee should be your spouse. Some clients decide to have their spouse as co-trustee. This is fine; however, some financial institutions might require both signatures on the trustee application or new form to open Trust accounts. More conservative institutions, such as Fidelity, do require both trustees to sign the forms. This is a failsafe and a check and balance to make sure both of you are in agreement of how to invest funds.
After your spouse, most people name their children as successor trustees. The big question is how many and which children to name. If you have children from the same marriage, it’s usually fairly easy. Some people discuss just having the oldest as a successor trustee. Some people discuss having more than one child; say two or three as successor trustees. I found that as long as all the children are mature enough, it’s usually best to have all of your children as successor co-trustees. This allows your adult children to discuss things and decide who gets which asset and to make sure that they’re all in full awareness when you and your spouse pass away. This allows two or three children to distribute the assets equally per your discussion or description, and once they’ve distributed the assets into either individual names or to keep in trust for their own benefits, they can become the sole trustees of their own trust. This creates a sense of fairness when distributing out the assets. If you’re in a second marriage or you have children from a prior marriage, it might make sense to have one child from your current marriage and one child from the prior marriage as successor co-trustees. This would allow another sense of fairness to distribute the assets as you wish. Most clients choose not to do this and name just the primary child who is the more financially astute to be the successor trustee. This does work as long as all of the other children are informed as things go through. That way there’s no surprises.
If you don’t have a child to name as a successor trustee or you don’t feel like your children are ready to be successor trustee, most of my clients tend to use their brothers or sisters. A lot of times we have siblings who are fairly well off who get it, who understand how to distribute assets and are willing to do what it takes. If the brother or sister is not able, then some people will actually choose their parents who are more fiscally responsible to be successor trustee. If a parent is older, or is unable to serve, you can name another successor trustee. In that case you usually tend to name an aunt, an uncle, or you name a very close friend. Most professionals choose not to be successor trustees. The reason they choose not to be successor trustees is either their financial institutions they’re working at do not allow them to be successor trustees, or they already serve a different role. A lot of people don’t want to serve a dual role as both trustee and also money manager. This could create some form of conflict of interest.
Always understand you should have clauses in your revocable trust to state what happens if one of the trustees is deceased or incapacitated and unable to serve. This process of thinking about who is your best trustee or even co-trustee is very important to maintain your wished of your revocable trust.
At Blatt Legal, PLC, my law firm, we always talk about who is the best trustee and successor trustee. It is part of the discussion as I draft your revocable living trust and your other documents. Traditionally the same person who is your successor trustee probably should be the person in charge or your power of attorney. This person in Florida is known as the attorney-in-fact. This is the person who makes financial decisions if you’re unable to. As always, plan today, protect tomorrow.