Protecting your family’s legacy through a family trust is an essential part of estate planning. No matter which type of trust you choose, selecting the right trustee is arguably the most important step in the process. Since you stumbled across this article, let’s assume you, the reader, have been selected as family trustee – congratulations!
After being legally named family trustee, it’s time to get to work. In your role as trustee you will have specific responsibilities that can range from simple and easy to complex and unique. You’ll be expected to keep detailed records, manage investments, file income tax returns, and more. This, on top of your own personal matters, can of course cause a level of burnout.
To prevent family trustee overload and ensure you’re meeting your fiduciary duty, it’s important to build a strong team around you to support the trust. Below we highlight the six need-to-know people to help round out your inner circle.
As family trustee, one of the core responsibilities is investing. The trust document likely won’t detail an exact strategy for investing trust assets, so it will be your job to develop an investment plan. This is when you’ll want to find an experienced financial advisor.
For this role you’ll want to seek out an investment advisor who provides portfolio management and financial planning services under a fiduciary standard of care. As a trust beneficiary can hold you liable for your management of the trust, it is arguably just as important as your own relationship with the advisor, so it’s crucial that you properly vet advisors and understand their compensation, standards, industry experience and professional network. This also means they should be familiar with the Uniform Prudent Investor Act (UPIA), just as you do as trustee, and know how to manage the investments to comply with its statutes.
Make sure to find an investment advisor that understands the difference in roles between beneficiary and trustee. The advisor should be comfortable conversing with both parties, but ultimately they will be managing the investments according to your guidance. They should have an understanding of trust taxation rules, which can be complex depending on the trust structure and its handling of distributions to the beneficiaries.
When building your team, starting off with a financial advisor is key as they will almost always have a strong network of estate planning attorneys and accountants available for when you need additional support.
An estate planning attorney is another key figure to include in your inner trust circle. Once the trustor has decided to establish a trust, it’s time to call in professionals, or in this instance, estate planning attorneys, to help protect and manage assets.
Estate planning attorneys provide a range of services like creating a will, establishing a trust, designating beneficiaries and power of attorney (POA), resolving estate disputes, distributing assets, and providing probate expertise.
This role is the jack of all trades – dealing with tax sheltering to elder care planning – so if you aren’t already working with an estate planning attorney now is the time.
Speaking of taxes, the next addition to your team should be an accountant. This role serves two purposes needed for the trust – tax accounting and trust accounting. Typically, a CPA gets involved with the trust accounting through their work on the beneficiary’s tax accounting, but it’s also not unusual to have two separate accountants take on the individual tax types.
According to the Journal of Accountancy, estate executors and trustees will be responsible for managing the transfer of more than $4.8 trillion in wealth from one generation to the next. Having a trusted accountant on your team who specializes in estate and trust tax services ensures the trust’s wealth is protected while also reducing the trust’s tax burden.
Following the trustor’s death, your first instinct may be to sell off any property. Well, it’s generally not that easy. Probate can be a lengthy and difficult process, so a Certified Probate Real Estate Specialist (CPRES) can help you navigate the tough terrain.
If you don’t already have an estate planning attorney that’s helping you avoid probate, a probate real estate agent is the next best thing. Probate is the legal procedure an estate goes through following the passing of the trustor, where a court begins the process of asset distribution. Even if a family trustee is named on the will, probate can sometimes be unavoidable.
You may already have a network of real estate agents you’ve used to buy and sell your own properties, but probate real estate agents deal specifically in complex probate property sales procedures.
For family trustees with a close personal relationship to the beneficiary, this addition may be the hardest. An aging services provider, like assisted living, in-home care specialist, or hospice facility, plays an important role in estate planning. Providers help care for the beneficiary in their next stage of life, providing services like nutritious meal delivery to end of life care, depending on the health need.
Not all beneficiaries are clear about their wishes for future health needs, so it’s critical to have open and honest conversations around health and wellness.
Succession planning comes in the form of naming a successor trustee, or someone who will take over your role should the need arise. This can be a family member, friend, or professional trustee group who will now take control of overseeing and administering the trust.
You can work alongside the trustor in advance to help select the successor trustee. When deciding on an individual or group, consider things like:
Once you’ve landed on the right fit, the successor trustee must accept or decline the role. If accepted, be sure to carefully review the trust documents and will with the successor trustee and file all necessary paperwork alongside the trustor.
Being selected as family trustee comes with great responsibility. Now that you’ve taken on this challenge, it’s time to build a strong team of professionals to support you in each unique aspect of estate planning.
To help for a smooth transition, we’ve compiled a helpful guide on how to choose an advisor when acting as a trustee. This guide comes complete with in-depth resources like understanding compensation structure, tips for vetting and interviewing an advisor candidate, and recommended due diligence.
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