Choosing the Wrong Successor Trustee Can Undermine Your Estate Plan
Many estate plans contain revocable living trusts that will become irrevocable (cannot be easily changed or terminated) when the trustmaker dies. Such trusts may benefit the surviving spouse during their lifetime and may continue for the benefit of several additional generations. Because these trusts can be designed to span multiple decades, it is crucial to choose the right succession of trustees.
Selecting the right trustee is one of the most important steps in effective trust administration and long-term planning. If you are reviewing your trust or creating one for the first time, the estate planning lawyers at Pavone Law Group in Bloomingdale, Illinois can guide you through successor trustee decisions, trust administration, and the legal protections needed to ensure your wishes are honored.
Does Your Chosen Successor Trustee Have to Act Right Away?
When you create your revocable living trust, you will usually be the initial trustee. You will still be in charge of managing your accounts and property as you see fit while you are alive and well, but the trust becomes the legal owner of those accounts and property instead of you as an individual. However, you will likely also be the beneficiary of the trust while you are alive, so you will be able to benefit from the trust’s accounts and property throughout your lifetime. With this arrangement, your selected successor trustee will not step in to manage your property unless you resign or desire someone to act as co-trustee with you, you become incapacitated (unable to manage your affairs), or you pass away.
Are Family Members the Right Choice for Successor Trustee Roles?
Your trust is intended to continue for years, so choosing the right succession of trustees is critical to its longevity and ultimate success. The successor trustee you select could be the same person paying your bills if you are alive but incapacitated (your agent under your financial power of attorney), or they could be someone different.
You may assume that a family member, such as your spouse, a sibling, or an adult child, will be the best person to serve as the trustee of your trust when you are no longer able to serve. You may think family members will better understand the varying needs of your beneficiaries and keep the costs of administering the trust down.
However, in reality, family members may not be able to fulfill all of their fiduciary obligations, either because they do not have the time or because they do not feel comfortable managing the financial, legal, or distribution requirements of the trust.
Benefits of Choosing a Professional Trustee for Trust Administration
If family members are not the best option for your successor trustee, you may be able to choose a corporate or professional trustee. One advantage of selecting these types of trustees is that they can often meet all fiduciary obligations under one roof for a specified fee. In addition, a corporate or professional trustee will act in an unbiased manner when making distributions and investments, which will benefit current and future beneficiaries. This option can be beneficial if you have a blended family and would like to provide for your surviving spouse while having anything that is left over held for the benefit of your children from a prior relationship. In situations like this, you may not want your surviving spouse or child from a previous relationship to be in charge of managing the money because they could have conflicting priorities. Also, a corporate or professional trustee will not get sick or be too busy to oversee the trust’s day-to-day administration.
Should You Give Your Beneficiaries the Power to Remove and Replace Trustees?
Forcing your trust beneficiaries to be stuck with the wrong trustee without a reasonable means for removing and replacing them may cause an expensive visit to the courthouse.
It may be necessary to build provisions into your trust agreement that will allow your beneficiaries or an independent third party, such as a trusted advisor or a trust protector, to remove and replace the trustees without court intervention. The fact that the trustee can be removed and replaced without going to court is often an incentive for the trustee to work out any differences with the beneficiaries. On the other hand, to prevent beneficiaries from removing trustees without valid cause, you might prefer to involve the court if a trustee needs to be removed.
Schedule a Consultation With Pavone Law Group’s Estate Planning Lawyers
Selecting a successor trustee is one of the most important decisions you will make when creating a trust. Though family members or loved ones may be your initial choice, it is wise to consider a corporate or professional trustee, either alone or as a co-trustee, depending on your needs. Choosing the right trustee can support your long-term goals and protect your beneficiaries.
If you currently have family members named as successor trustees or want to explore your options, contact Pavone Law Group’s estate planning lawyers. We help Chicagoland families navigate trust administration with clarity and confidence. Reach out today to schedule a consultation.