Revocable living trusts are wonderful because of the flexibility they allow in managing your assets and providing for continued management in the event of disability. Most people choose to be trustees of their own revocable living trust during their lifetimes, but a critical choice facing those making trusts is who to select to manage things after they have passed away.
Many people choose family members, usually a child. In many instances this makes sense, especially if the trust is to be distributed outright to the beneficiaries shortly after the death of the maker of the trust. However, if a trust is to be maintained for a longer time, perhaps because the trust maker did not want to give money outright to a child with a history of financial mismanagement, then the person selected to be the trustee will face ongoing requirements to wisely manage the trust’s assets, account for those assets regularly, make timely distributions, and avoid any self-dealing which could lead to accusations of breach of trust. This can be a daunting task for people who may never have heard the word “fiduciary” before.
A fiduciary is anyone who is holding assets which are to benefit another person. There is an entire body of law dealing with fiduciaries and the high standards to which they are held. The more complex a trust is, or the longer it may exist after the trust maker’s lifetime, the more chances there are that mistakes could be made by the trustee.
The other side of this issue is what to do if you have been asked to serve as a trustee. Hopefully, if your parents named you as successor trustee of the family trust they at least warned you the job was coming. Tolstoy began Anna Karenina with the line, “Happy families are all alike; every unhappy family is unhappy in its own way.” Families are complicated, even families where the mom and dad were married only to one another and spent more than 50 happy years together. Blended families are chock full of issues waiting to pop up when the parents have passed away. If you have been named as a trustee, consider carefully the path you will take if you accept that nomination. That’s right, “if” is the operative word because no one can force you to serve.
I have had more than one trustee decide in the middle of an administration that the stress of dealing with unruly siblings, nieces or nephews, was just too much and they have resigned. A well written trust usually has alternate successor trustees, so if you opt out someone else will already have been named or there will be a provision to allow the beneficiaries of the trust to select an appropriate trustee.
The bottom line is that trust makers should carefully consider who they want to be in charge when they themselves can’t be, and those who have been asked to serve should carefully consider the implications of that service. No matter which side of the situation you are on, you should consult with an experienced estate planning attorney to come to the best possible decision for you.