Naming Your Trustee: It’s Not a Trophy

I saw an old friend the other day and we talked about how his life has been the last couple of years as he walked the tender journey with his parents through the end of their lives—and then experienced the tsunami of tasks as he administered their estate.

There are so many aspects of what I call the “Exit-Continuity” plan. As the person who is aging, there is the preparation for the exit you want: what can you do now to improve the possibility that you have the quality of life you want later? Usually these fall into themes: keep moving and other healthy lifestyle choices, find meaningful ways to express to the world who you are and what matters to you and tend to your important relationships.

Then there are the practicalities: what do your loved ones need to have in place so they can continue on without you? This is everything from making sure they have the financial support they need if they are dependent on you to where the passwords and policies are and—most relevant to today’s discussion—having your estate plans in order.

You need a signed and notarized financial power of attorney. You need a signed advance directive and to have had a heart-to-heart conversation with your healthcare power of attorney about your end-of-life wishes. What is on the paper isn’t enough because real-life medical decisions are more complicated than what’s written in black and white.

And you need a will, and maybe a trust, and in those documents, you are going to designate who will carry out your wishes.

Most people name a family friend or relative, and often parents name their adult children. This makes total sense because it involves personal details and seems like it should be a reasonable task: clearing out, paying up, a few phone calls, some forms. I will walk you through the conversation I have with my clients about an alternative to this, which is to name a professional trustee, because often it is a lot more involved than that. It isn’t a trophy but a job.

If you have a trust, the powers a trustee holds include how much and when people get money from the trust and what investments are allowed, as well as obligations to protect trust assets and to follow complex trust accounting and administration rules and filings.

Look at that list and play the “what if” game to see where things can go wrong. You need a family member who can learn, is willing to ask and is capable of following advice about the rules. As far as the risk of preferential treatment of heirs, they need to be sensitive to bias and strive to be impartial.

As people are living longer the risk is that the child or sibling trustee is at an advanced age when they are managing this task, and their own diminished capacity can be a real challenge, particularly if they are reluctant to recognize it. This situation is becoming more common, and you need to make sure the circumstances under which trustees will be removed and appointed are explicitly specified.

The other thing to consider is the length of the planning. If you plan for the trust to continue on, perhaps because you don’t want minor children or grandchildren to inherit until they are at an age when the money is more likely to help rather than hurt their independence or you have an inheritor with special needs, in these situations I particularly encourage considering this option.

In summary, the reasons to choose a professional or corporate trustee over a family member stem from the challenges inherent in the job. You need to be an expert in trust administration, able to emotionally distance yourself from family dynamics and stay objective and impartial, navigate family conflict, and sustain the effort over the long-term. While these burdens are borne every day by people with grace and dignity out of respect for their beloved, it is time-consuming and stressful, especially when managing large estates, and comes during an emotionally difficult time.