Who Should Be Trustee? Part 1

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It’s one of the most important questions any estate planning attorney can ask — but also one of the most complex to answer. Even so, the question is rarely explored with the depth that it deserves. It will take many more than this single post to cover the subject, so let’s start with an exploration of how to properly frame the question with the right goals in mind.*

I’ll do that by using what I have found to be the most common situation for children in the mature or nearly mature stage — i.e., the pretty responsible child who does not have the exposure that his or her parent(s) do to financial wealth or the sophistication to deal with it appropriately. In that case, you will find advisors often suggesting one of four main approaches:

  1. Because the present circumstances suggest that the child may not be fully capable of managing his or her inheritance, an independent trustee should be appointed.
  2. The child and one or more independent co-trustees should act together.
  3. Some counsel against a trust.
  4. Others will suggest a trust with the child as his or her own trustee.

So who’s right?  Well, of course, there is no single answer. The key is to discover the best answer for your particular circumstances, without irrelevant biases clouding the discussion or the decision. Step one, I submit, is to understand how the question is being framed, what information is being communicated by the selection and what is left unspoken. Let me give you an example:

In situation one, there is a predisposition to reacting solely to the present circumstances.  Often this is accompanied by an easy punt of a more difficult conversation about how to change those circumstances and a reliance on “you can always change the trust later.”  But if your goal is to have a financially mature beneficiary, shouldn’t consideration be given to what happens if the desired result is achieved?  Shouldn’t consideration be given to whether the structure will impact the ability to achieve the desired result if death or incapacity or procrastination prevent you from “changing it later?”

We will explore the other situations referred to above, as well as considering differently-situated beneficiaries, but I hope the above gives you a start on approaching the question differently.  In the meantime, would you let me know how you feel this question was treated in your own planning process?  What was handled well?  What gaps did you feel weren’t filled?

For part 2 of this series, please click on www.markshiller.com/2014/10/who-should-be-trustee-part-2/.

* You might want to read The Purpose of Apple Trees if you’re unsure of what your “right goals” might be.

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Mark initiated this blog due to his passion in assisting and equipping families to manage their wealth and their families well.

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