How hard is it to be a successor trustee?

[BBQ-Nut]

DW and I are going back and forth on updating our Will and Trust.

Our two sons will both be 'of age' by the end of the year, and while both are currently listed as beneficiaries, they are not named as successor trustees.

We are considering simplifying our respective named successor trustees to an in state family member who knows us both.

However, per the terms we have in our trust our sons will only receive partial percentage distributions based on age.

This brings up the issue of the role of the named successor trustee for having to manage the trust over this time period: records, distributions, taxes, etc.

And more weight given to the role since a trustee can be legally liable for managing the trust.

In the case of a family member - they have a life and family too.

So, I worry about the time/effort/burden it would take for said family member for executing due diligence and fiduciary responsibilities for years and years.

Would it be 'kinder' to name a third party entity as the successor trustee.

Has anyone included the wording that the Estate Attorney has 'the power to appoint' a fiduciary to carry out the instructions of the trust?

Thanks in advance.

 

[ERD50]

Do you have any reservation with having your two sons be the successor trustees? That seems simplest, and since it will effectively be their own money they would be managing, there is no conflict of interest, and it makes sense that they share the 'burden' of administration (which should not be that hard).

Any issues that the two won't see things eye-to-eye? That might be a reason to look elsewhere, but depending on how you write the trusts, they really don't have all that much discretion.

OK, I've been told there are no 'trust police' - so if the two sons started pulling funds before those age restrictions, I guess there is no one to stop them - so maybe that is your concern? Maybe just a third party to sign off on withdrawals, rather than full administration of everything?

Any professional 3rd party could want a pretty penny for the service, not sure how that works though.

I think most trusts have some sort of provision for appointing successor trustees if the named ones are unwilling or unable to serve, check the NOLO forms, or with your attorney, but I think that common, maybe even required (stuff happens, need some sort of plan).

At any rate, I'd spell out to your sons the basics of long term investing so they don't get suckered into expensive or just plain bad investments. A simple target fund or something. I think that if all the divs/income comes out of the trust and direct to the beneficiaries, the trust may not even need to file a tax return - the income all goes on the beneficiaries returns as income, in whatever form it was in. But check on that (everything in fact - I probably don't know what I'm talking about!).

-ERD50

 

[MooreBonds]

Has anyone included the wording that the Estate Attorney has 'the power to appoint' a fiduciary to carry out the instructions of the trust?

Thanks in advance.

I would imagine that as the trustee, they can reasonably hire an outside consultant to assist them in their duties as trustee, whether for taxes, investment management, or legal advice anyway. As ERD50 said, there's no "trust police", so if anything did go awry, it would be up to your 2 sons to flag it and raise the issue.

Have you discussed this topic with your proposed trustee? Who is your successor trustee? Do you know what your proposed trustee knows in terms of investments? would they be suckered in by an Edward Jones or Ameriprise vulture? If they'd simply place it all into a handful of ETFs and (pssst) Wellesley, I can't see there being much involvement from their end, apart from 1 or 2 distributions per year to your sons, and then getting a single 1099 from Vanguard (or another account) to give to a tax preparer. Just set it and forget it!

 

[MasterBlaster]

Is there something in particular that the OP wants to occur after his demise ?

Sadly, having personally been through one of these myself, here's my take on estate planning and trusts:

As another poster stated , there are no trust-police and nobody will be watching how the trust is settled. If someone is ethically challenged, keep them as far away from being a successor trustee as possible. In that case the potential for abuse is high. Settled estates done unfairly can break families apart.

My personal opinion is that (non-trust) probate isn't all that bad and (considering) not all that expensive. You have and may indeed want court-supervised disbursement of property. It may be slow but it will be fair.

Too many people of modest means go with trusts when (in my opinion) a simple will is the way to go.

Bank accounts, IRAs, 401k's etc., can all be set up to pass outside of probate to whomever you want. The rest can be disbursed by the court by a normal probate process.


Per the successor trustee's efforts, many trusts have a stipulation that the successor trustee can be paid out of the estate for his time and effort. Compensation of 1 percent of estate assets per year is common for example.

 

[Jack_Pine]

We have a provision to pay the successor trustee. It is 1% as mentioned.

 

[splitwdw]

What is "of age" and why only partial distributions based on age? Are your sons young? I don't have kids so not something I'm familiar with.

 

[2017ish]

What is "of age" and why only partial distributions based on age? Are your sons young? I don't have kids so not something I'm familiar with.

Reading between the lines, sons are each 18 or more, but they are not 26, which is a general rule of thumb as to when one's prefrontal cortex is mature. (the insurance companies had it right before science got there).

Thus, generally speaking, although legally adults, the boys would be unduly delighted in risk taking and not real good at deferred goals. (yeah, I dimly remember that!).

We also dealt with this in our estate planning (3 boys). Luckily, 2 of them are now 25+, and the youngest seems to be ahead of the game in this area.

E.T.A.: the lack of full impulse control (and ability to delay gratification) is why one would have a trustee between beneficiaries' 18-26 years.

 

[check6]

Per the successor trustee's efforts, many trusts have a stipulation that the successor trustee can be paid out of the estate for his time and effort. Compensation of 1 percent of estate assets per year is common for example.

I am the successor trustee currently settling the estate of my mother. I am obviously not paying myself enough.

 

[Dash man]

We are also looking to redo our trust and have decided to not include a family member as successor trustee. Our decision is in part because we're concerned about financial decisions our family members have made in their own lives. Our estate will be hit by state inheritance taxes and potentially federal estate taxes if not handled properly. Though our sons are 33 and 26, we don't think they're ready for the full sum to fall in their laps, so we want to spread it out over 15 years or so. It will also protect it from falling into their spouses hands in case the marriages go south...at least for a while. Our successor trustee will be our financial institution, though the fees will not be cheap, we think it is the right decision.


Sent from my iPhone using Early Retirement Forum

 

[rodi]

What is "of age" and why only partial distributions based on age? Are your sons young? I don't have kids so not something I'm familiar with.

I think 2017ish has it right. Our kids are younger than BBQ-nut's, and we have provisions to pay for the college and expenses, then pay out 1/3 at age 25, 1/3 at age 30, and the balance at age 35. Our reasoning was based on observing some craptastic decisions made by former friends who received large lump sums at early ages. Bad decisions that pretty much started them on the wrong path. (Think drugs, divorce, dropping out of college, etc.)

We have a family member who will act as successor trustee - but we have full trust in her. (My sister). She's also the guardian who would parent our boys if we die before they're of age. And our two 2 back up successor trustees are similarly trusted.

Truthfully, I don't see paying her for this role, but obviously paying her expenses (tax preparation fees, banking fees.) I think she'd be offended to take a commission or salary. But, obviously, our family dynamic may not be typical.

 

[jerome len]

You sound like you might have substantial net worth.....if so be very careful. Start with your lawyer for options.....I have a good one that has handled many very wealthy families. Next set up a payment schedule for your successor trustee and name a couple of other options in case your successor trustee no longer wants to to serve. We then had a "special protector team" of three trusted individuals to appoint and watch over the successor trustee. Sometimes even family members take advantage of their expenses.....you can read about them in "elder abuse" cases when health forces giving power to a successor trustee. It is complicated.......trust many times goes out the window when money is involved. my FIL, DD, idiot brother, all took advangate of funnelling out extra cash or treasures from the family.......good luck, with proper planning you can put a good plan togetherl.
















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