Picking Your Executor or Trustee

At some point your estate will be managed by someone other than you. If you are incapacitated, that person will step in to manage it to care for you, and on your death someone will wrap up your estate and distribute your assets to others. If you put an estate plan in place, via a Will or Trust, you decide who that person will be. If you don’t, the State of Arizona, via the legislature, has decided who that will be. Will the State’s choice be one you are happy with?

When you establish a Revocable Living Trust, the person in charge is your successor trustee. That successor trustee will be caring for your finances to care for you if you can’t handle your estate because of incapacity. The successor you pick to serve after your death will make sure your last expenses are paid and that your assets are distributed the way you direct to the people you want to have them.

A common question is just how to pick the successor trustee. Here are qualities to look for in a successor trustee:

1. Integrity and loyalty. For me, this is the most important quality. It us terrible to get the call that a trustee has been mishandling money or, worse, filling their own pockets with trust assets. It is essential to select someone you trust implicitly, someone you believe would never consider misusing the trust assets.
2. General business competence and willingness to seek assistance. You might think you need someone with investment savvy to be your trustee. What you really need is someone who is willing to seek out and listen to good counsel and advice, and someone with the capacity to discern between good and bad advice. Your trustee’s understanding of business and financial matters and their ability to find a good investment advisor is more important than their (perceived) ability to pick winning stocks.
3. Sensitivity to and understanding of your beneficiaries’ needs and circumstances. This factor is one that often keeps a client from appointing a bank, trust company or fiduciary as trustee. Will the institution be mindful of what you would want for your beneficiaries, or will it be too regimented about what it sees as a “need”? A family member may be a better choice for many people, simply because they will be more responsive to a beneficiary’s requests. Where there are substantial assets in a trust, however, a good compromise might be a family member and a trust company serving as co-trustees. In addition, a local institution may be more responsive. When you interview a trust company, ask if the person who would serve as the primary contact for the trustee is located in Arizona or is out of state.
4. Similar values and attitudes about money. It’s important for a trustee to understand what you want for your beneficiaries in the way of distributions, access to the assets, and opportunities to manage the assets themselves. If your values and your trustee’s values are too incongruent, your beneficiaries may not be treated the way you want. If learning to work hard and make your own way is important to you, don’t pick a trustee that wants to pay for everything for a child. If you want a beneficiary to have the opportunity to learn how to manage the trust assets, pick a trustee who is willing to teach the beneficiary and have them involved in decision-making.
5. Willingness and ability to serve. Always ask whether the trustee is willing to serve and has the time to do so. The initial work of a trustee can be quite time consuming, and ongoing maintenance and accounting take time as well. If your first choice for trustee is reluctant, that may be a sign that he doesn’t really have the time or ability to do a good job.
6. Geographic location. With globalization and advances in technology and communication, the location of your trustee and beneficiaries may not be so important. Still, the nature of your assets may necessitate selecting someone who is nearby. For instance, if you own several rental properties in Phoenix, a trustee in New York won’t be able to readily check on whether the property manager is really doing its job. The properties may be run down and lose value before the long distance trustee realizes it. Consider also that if you are incapacitated, you may want a trustee who is nearby to watch over your care as well as the money being paid for your care. Keep in mind too, that you can appoint one trustee to serve while you are incapacitated and another to serve after your death.
7. Cost and amount of estate assets. Last, you need to consider cost. Banks and trust companies generally charge based on a percentage of the assets under management. Many don’t offer trustee services for estates under $2-5 million (or more). Private fiduciaries, who are licensed by the state, charge on an hourly basis. While they are often willing to manage smaller estates, many have limitations. A family member or friend may be willing to manage your estate whatever its size. Remember, though, that you should provide compensation for the work the trustee performs, even if he is your brother.

Selecting a trustee is important. If you keep these principles in mind, you should feel confident you have made a good choice. I’m always happy to discuss these choices with you in our free initial consultation. Call my office at (602) 375-6752, or make an appointment at our website: https://libbybanks.com/schedule-estate-planning-meeting.