Hello! My name is Bridget Mackay, I’m an attorney in Petaluma, California and I practice in the area of Estate Planning, Wills, Trust, Probate, Trust Administration.
Today, my blog is on the subject of choosing a trustee; one of the biggest questions I get in my practice. Some basic requirements you want to consider when you’re looking for that person who’s going to distribute all of your worldly goods is their age, are they older than you? Younger than you? Their maturity level, do you think they have some financial maturity, or maturity in general to deal with others? Are they responsible? What kind of level of responsibility do you think they have? Location is another, are they in another country? Are they close? How difficult will it be for them to get back and forth to perform the tasks that they’ll be required to do? Finally, financial acumen, they don’t have to be CPAs or financial planners or, stock brokers, but definitely someone who knows… Has some level of understanding of how finances work, has reasonable spending limits themselves, things like that.
Today, I really want to talk about the relationship. When you pick a trustee, you may or may not have several people to choose from, but there are things that you really need to consider. You’re tasking this person with distributing your trust, carry out your wishes, and often, they have broad discretion, meaning, anything that happens, the buckle stopped there with them, and they are the final decision-maker in all aspects of the trust. They must interact with the beneficiaries, guardians of minor children, advisors to the trust, whether they be attorney, CPAs and financial advisers, so, investment broker, insurance agent.
Sometimes friction can arise with beneficiaries because of the decision these trustees make, because they have such prime discretion. I’ll tell you a case that happened in Southern California. A couple appointed a family member as a trustee for trust that was set up for other family members. As the trust was being administrated, tensions escalated to the point where the beneficiaries of this trust went into the trustee’s home and placed a listening device under his bed. Ultimately, this made it through the court system, the trustee and his wife after they found, obviously the listening device, sued the beneficiaries for invasion of privacy and trespassing, and eventually were awarded $475,000 in damages and attorney’s fees because of those beneficiaries’ actions.
It is sometimes not possible to eliminate any tensions that may occur between the trustee and the beneficiaries, but there are some measures you can take to avoid it if you know it’s a possibility. The first is, don’t choose one sibling to direct the distribution for another sibling; don’t place anybody as their sister or brother’s keeper. Second, place a subsequent spouse as trustee for children from a prior marriage; don’t do that, because then you put the step parent in relationship of these discretionary decisions vis-a-vis their stepchildren. Third, consider a bank or a financial institution as a co-trustee if there is someone you’re not completely sure about or you think there might be tension around. Four, if you know there will be tension, consider a bank or a financial institution as the sole trustee; then you have a neutral third party. If you feel that banks are too impersonal, consider a license to private fiduciary. They’re licensed in the State of California, and they are a good option to be impersonalization of a bank. Finally, consult an experienced estate planning attorney to help you with your plan and help you make the decision about a trustee.
San Rafael, CA