One of the most pivotal questions in designing your revocable trust, used as part of your estate plan, is who will serve as the trustee upon your death. Clients tend to choose their children for a variety of reasons: children serve as trustee without charging a fee out of obligation, they do not want their children to feel left out, or they are uninformed of what the role of a trustee actually entails. Here are the top reasons why you should think twice before naming your children as trustee.
- Serving as Trustee is a Liability. The job of a trustee can last for years and estate-related conflict is on the rise. Trustees can get sued, and when they do it is usually by a beneficiary. Although Minnesota allows trustees to use the trust assets to defend themselves; in some cases, there are instances where the trustee can be held responsible individually.
- Children are often unqualified to serve as Trustee. Trustees need to have an understanding of legal, tax and investing issues and be able to deal effectively with attorneys, accountants and investment managers. If the trust owns assets that require a specific knowledge set, such as a small business, an apartment complex or agricultural ground, the trustee needs to have the expertise to be able to effectively manage those assets.
- Conflicts of Interest. Trusts are administered outside of probate without court supervision. The trustees are left to their own devise to administer the trust as you have directed in the document. If you appoint a child, they typically also are a beneficiary so they are forced to wear two hats. The trustee needs to be honest and trustworthy, but also willing to always act in the best interest of the trust, even if that differs from the trustee’s individual interests as a beneficiary.
- Serving as Trustee is Time Consuming. The pace of society is ever increasing, and people are busy. Do your children really want the job of Trustee? Or would they prefer it be handled by someone else? People hire out their legal work and tax preparation all the time, if not for other reasons but because they just don’t have time to do it. Often, children have their own families and careers and would prefer not to have to take on this additional role, even if they haven’t admitted it to you. Additionally, trustees aren’t necessarily paid for their time, although they can be if the trust document provides for it.
Sometimes it is more appropriate for clients to consider naming their children as beneficiaries, and leaving the job of trustee to an independent, qualified professional.Read More