Naming a professional trustee for your living trust is a dangerous proposition. Let me share an example.
Joanie and her brother have been trying to settle their mother’s estate for the last two years. It’s a small estate and their mother set up a living trust before she died. They never expected all these problems. But after shredding nearly $100,000 in legal fees (so far) they’re angry.
When their mother set the trust up, the attorney assured the family that settling the estate would be a quick and inexpensive process once their mother passed. The trust helped them avoid probate (read “What is Probate?”) so they were convinced the process would be a snap. Unfortunately, it was anything but. What is the problem?
Mother didn’t want the kids to fight about money. Rather than appoint either one as the trustee of the family trust, she named a professional trustee – a big company that also happened to be an affiliate of the brokerage firm she was using.
That’s the root of the problem, because they had an inherent conflict of interest. The trustee is supposed to settle the estate quickly. The brokerage firm is interested in prolonging the process as long as possible so they continue collecting fees.
Now, Joanie and brother Rick are faced with the either taking the trustee to court or biting the bullet and accepting what the trustee is doing. Neither choice is very attractive. What could Mom have done differently?
Name a family member trustee.
This can open the door to lots of squabbles of course, but it’s the right thing to do in most cases. And let’s be honest. If there are going to be squabbles, they are going to come up regardless of who is named as trustee. It’s just that when you name a professional trustee, those squabbles become very expensive and time consuming.
There must be someone in your family who is qualified and responsible enough to act as trustee. Name that person and then talk about it with everyone. Now. While you’re alive and healthy. Don’t put this off and don’t be a chicken about it. Tell everyone why you’ve selected the person and what you expect of everyone.
If you plan on leaving certain assets to one particular person, tell everyone now and tell them why. This will reduce (but not eliminate) the disagreements.
A professional trustee may be your only choice if you have no heirs. But if that’s the case, it doesn’t really matter…does it? There shouldn’t be any fighting going on.
If you do have heirs, name one as beneficiary. Understand that professional trustees have an incentive to prolong the process. Selecting a professional trustee to administer your trust may seem like the best choice if you’re trying to avoid family fights. But really, it’s just the easy way out and probably just a delay tactic that’s going to cost your heirs lots more money.
Avoid this route like the plague.