A recent Investing Daily article, titled "Making Your Most Important Decision," has some strategies to consider when selecting the financial fiduciaries for your estate.
The first is co-trustees. Both professional trustees and individual trustees each have advantages and disadvantages. You can try to get the best of both by naming co-trustees. There are different ways to structure a co-trusteeship, so ask your estate planning attorney about which way to go. Typically, the trust company could be the primary trustee. It would take care of the record-keeping, administration, and investments. Your trusted friend or family member serving as a co-trustee would have access to all the records, and he or she would be able to reviews them and spot any issues. The original article suggests giving the non-professional co-trustee the power to veto fees, investment decisions, and other key actions.
If the trustee has the power to decide the timing and amount of distributions, it can be a source of problems, disagreement, and headaches. One idea the original article suggests is to give the non-professional trustee sole authority over distributions. Another option is to have several co-trustees who determine the schedule and amount of distributions. They can also be required to make unanimous decisions. With a trust, you have the ability to set things up the way you think will be best. However, you might have a tough time getting a professional trustee to go along with a position that is full of limitations.
Another option in trying to get the best of both worlds without some of the issues involved with co-trustees is to split trustee duties. You could have several trustees, each given the responsibility for a specific function, or you can have just one trustee who employs several professionals to conduct some of the duties. There are many ways to split the trustee duties. In general, there are three main areas of trustee duties: (i) Administration; (ii) Asset management; and (iii) Distributions. For example, you could choose a team that looks like this:
- A corporate trustee to keep the records, prepare taxes, and keep custody of the assets.
- An investment manager to serve as co-trustee handling only the investment decisions.
- A friend, family member, or professional advisor to be a third co-trustee who decides how much to distribute and makes any other decisions.
The original article suggests that what may be the simplest approach to splitting trustee duties is to name one or more individuals as co-trustees and then specifically empower them, and perhaps encourage them, to hire professionals under them for administration, tax reporting, and investing. In this scenario, the professionals technically would not be trustees. They would be employed by the trustee. The person appointed trustee would be responsible for distributions and other matters.
These are only a few ideas. Check out this article and then speak with your estate planning attorney about trustees.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: Investing Daily (October 10, 2014) "Making Your Most Important Decision"