What To Know When Naming Successor Trustees
By: Krista D. S. Dupps, Esq
When you are establishing your revocable living trust one of the major decisions you will need to make is who to name as successor trustee(s) in the event of your disability or death.
Who Can I Name?
The legal requirements for a trustee are not much help in narrowing down the field. Your successor trustee needs to be 18 or older and should be a U.S. citizen.
Your trustee should be a responsible person who knows you and your family personally and manages money well. That person should be trustworthy, fair-minded, and dependable as well. This can be a parent, a sibling, or a trusted family friend.
It is important to keep in mind that you can name people who are listed as a beneficiary. It is perfectly fine for a beneficiary to also serve as a trustee. This can be your child, if you feel that child is responsible enough to manage the trust assets according to the instructions you have left in the trust. However, one consideration in whether or not to name a child is the family dynamic, especially if you have multiple children and they do not particularly see eye to eye on things.
Should I Name my CPA or Financial Advisor?
You might be inclined to name your attorney or CPA or financial advisor. When considering this, be aware that California law imposes extra requirements in order for an attorney to serve as a successor trustee and it is very common for the policies of a CPA firm or brokerage house to prohibit their employees from serving as a trustee.
Complexity of Assets
One factor that will play a role in your decision regarding successor trustees is the complexity of your trust distribution instructions as well as the complexity of your assets. If you have a fairly straightforward distribution of your assets after you pass away and not a whole lot of complex assets to manage, then maybe your child or one of your children is a fine choice. If you have multiple pieces of real estate, business interests, and complex investments in addition to a very complex set of distributions spread out to multiple classes of beneficiaries held in trust for extended period of time, including special needs beneficiaries who are receiving governmental benefits, then you probably want to name a mature person, or even list of successive nominees, that are capable and willing to manage that level of complexity.
If your estate is very complex, includes special needs beneficiaries, or there is not really a front runner to be your successor trustee, a good option for you might be to name an individual professional fiduciary or a corporate fiduciary to be your successor trustee.
The individual professional fiduciary named should be licensed by the California Professional Fiduciaries Bureau. You can interview and name a particular professional directly in your trust now or you can state that a third party, including perhaps your trust drafting attorney, can be responsible for naming a professional fiduciary when the time comes.
A corporate fiduciary, such a trust company or the trust department of a bank might be a good choice if you have mostly liquid assets that are going need extended management, possibly over several decades. A bank can provide that continuity over extended periods of time that an individual cannot. However, is not often the most ideal choice for most people as the institutions typically have minimum amounts that they will manage, including minimum amounts of liquidate assets that must be invested in their institution. Additionally, a corporate fiduciary may not provide the level of personal interaction with the beneficiaries you might wish for, especially given the fact that the actual employees assigned to your trust will change as they are transferred, leave, retire, etc.
Keep in mind that is a good idea to name at least one or two backups to your first choice just in case that first choice is not able to serve at the time at they are needed, for whatever reason.
Another option to consider is that you do not have to just name one person at a time; you can name two or more persons to serve as Cotrustees. They will need to be people who can work together, as it is typically required that all decisions made by Cotrustees must be unanimous. This may be a good idea if your trust estate is on the more complex side, as they will be able to split up the duties.
Know All Your Options
These are just some of the factors to consider when naming successor trustees of your trust. There are many other option and variations that might be more beneficial, appropriate, or even required given your unique set of circumstances. It might seem like a daunting task, but with some guidance, a solid trustee succession can ensure that the management of your trust will be carried out in a seamless administration without unnecessary delays or interruptions.
Please do not hesitate to call our office to discuss your estate and this very important task of naming successor trustees. You can contact us here or call us at: (619) 683-2545