One of the most popular additions to a well thought out estate plan is a trust. One reason trusts are so popular is the multitude of estate planning goals that can be achieved with a trust. If you plan to include a trust in your estate plan, you will need to appoint a Trustee to oversee the administration of the trust. If you have never before created a trust, you may be a bit intimidated at the thought of having to choose a Trustee. The Los Angeles trust administration attorneys at Collins Law Group offer some assistance by providing questions to ask yourself when choosing a Trustee.
What Is a Living Trust?
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts. Because your Will can always be modified up to the point of your death, a testamentary trust is always revocable.
Questions to Ask Yourself When Appointing a Trustee
One of the biggest, and most common, mistakes people make when establishing a trust is to name a spouse, close friend, or family member as the Trustee of their trust without really giving the matter sufficient thought. Instead of appointing someone close to you based solely on the fact that you trust them, take the time to consider who is best qualified for the job. Toward that end, it helps to have some questions in mind with which to evaluate candidates. You may have additional questions that cover unique concerns you may have, but the following general questions should get you started:
- Does the potential candidate have any experience in the legal field? Many of the tasks of a Trustee involve understanding complex state and federal laws that apply to trusts. Ideally, your Trustee should have prior experience in the legal field and/or a working knowledge of the laws involved.
- Does the individual have experience in the financial field? As the Trustee, he/she will be responsible for investing and growing the trust assets. Make sure a candidate has the experience and/or education to be able to take on this responsibility successfully.
- Does your potential Trustee have the time and availability to fulfill the role? This may seem obvious, but people often fail to discuss the appointment with their intended Trustee. When it comes time to administer the trust, the individual does not have the time, has moved away, or has personal/medical issues that prevent him/her from fulfilling the duties of a Trustee.
- Is the candidate willing to serve as your Trustee? Never assume that someone is willing to take on the job of Trustee, even if they are a family member or close friend. It is a big job and may be too much for some people. Always sit down and discuss the position with a prospective Trustee before appointing someone as your Trustee.
- Do you see any potential conflicts between the potential Trustee and trust beneficiaries? Appointing a family member can create conflicts if the beneficiaries of the trust are also family members, particularly if the Trustee has discretionary powers under the terms of the trust.
- Does the individual live close to major assets? If you include real property among the trust assets, it is best to appoint a Trustee who lives close enough to keep an eye on the property instead of relying on someone else to do so.
- Do you feel the individual would be good at conflict resolution? Conflict among the beneficiaries of a trust is common. Appointing a Trustee who is skilled at conflict resolution will often result in avoiding costly litigation which can drain the trust of assets.
Contact Us Today to Learn More!
If you need more information about trust administration and choosing a Trustee, consult with an experienced Los Angeles trust administration attorney. Contact Collins Law Group by calling (310) 677-9787 to register for one of our FREE estate planning workshops.
Attorney Caprice L. Collins is a top rated Harvard Law School graduate. She has 34 years of legal experience with a successful law practice devoted exclusively to Estate/Business Planning and Trust Administration. Attorney Collins is a well-respected keynote speaker on Wills, Living Trusts, Estate Planning, Business Planning and Trust Administration. She has appeared on California’s Real Estate Radio Station KTLK AM 1150 as a legal expert on Estate Planning and Living Trusts among many other notable media appearances.