Who Should Be the Trustee to Your Estate?

peter Blatt

This past weekend, I took my family boating.  We rented a 24-foot deck boat in Jupiter, Florida, and we road it up the Intercostal to Peck Beach where we all enjoyed a day of swimming and fun in the sun.beach day

For this trip, we decided to bring another family who has a 14-year-old daughter the same age as my older son, Ethan.  They have been friends for years, and watching the two of them interact was quite a fun experience.

My wife, and the girl’s mother, were both looking at each other with those half-moon eyes every time the two of them interacted.  We could almost hear them planning a future wedding.

Then, when the daughter asked Ethan to put suntan lotion on her back, I think they were more surprised than he was.

As we were returning to the dock at the end of the day, I thought about how happy I would be to one day to have grandchildren. I also thought how I would always want to be fair to them.

This feeling of fairness is constantly reflected as I interact with each of my estate planning clients.  I continued to think about my clients who would be coming to my offices in the next few days; clients whose main mission in life, is to be fair to their kids and grandchildren in their estate plans.

Estate planning is all about transferring assets when you pass away.  If you use something called a revocable trust, also known as a living trust, you can avoid probate.

probateProbate is a court proceeding that on average, takes about 11 months in Florida and has a cost of roughly 3% to 5% of the deceased’s assets.  People always complain about how long probates take, but in reality, it’s just a procedure or process specifically designed to regulate the ‘fair’ transfer of assets.

As an estate planning attorney, it is my job to make sure that the clients’ wishes are done.  Most of my clients do not want their kids or grand kids, or their spouse, to have to pay a large attorney fee and wait to receive assets when they pass away.

Could you imagine passing away with $1 million in a bank account and having your spouse or your kids wait up to nine months before they can touch the assets and, worse still, having to pay anywhere from $30,000 to $50,000 to an attorney to transfer those assets?

That is the reason why most of my clients want to avoid probate.  The best way to avoid probate is by creating a revocable trust.  This is a document where you still have full control…until the day you die… to do whatever you want with your assets; but, when you pass away, the document takes over and the trustee, in this case the successor trustee, has control.

A lot of people will designate first their spouse as a successor trustee and then your children.  If you become incapacitated, your spouse can take over and, if you pass away, your spouse can automatically, by law, become the trustee of your revocable trust and transfer the assets to themselves.  A lot of my clients make the following decision about transferring of assets.

familyYou first name your spouse as the beneficiary of your revocable trust.  If your spouse is unavailable or deceased, then you name your children as your beneficiaries.  Most of my clients will have their assets stay in trust for their children.

This is not done because the kids are of a minority age, and you want to protect your children from the outside world. If you leave assets in trust for your children, the assets are protected from divorce and also creditors.  If one of your children gets sued and the assets are in a revocable trust that you’ve created and they’re the beneficiary of that trust, then those assets are protected from creditors.

If one of your children gets divorced, then those assets are protected from the ex-spouse if you created the trust for their benefit. It is the ULTIMATE protection tool for children under 18 (and probably young adults as well).

Now, don’t think this process is easy. Because, the question of fairness always comes up, I strive to treat all of my kids the same.  I also want each of my grandchildren to be treated the same.

The inherent problem is that sometimes you might have one child with one kid and one child with two kids.  Thus, you have two grandchildren on one side and one grandchild on the other side; or, you might be in a blended family or second or third marriage.

You might have children from a prior marriage and so your spouse might also.  In order to determine fairness, it is always good to talk through what happens if both you and your spouse pass away.

I have found that the best way of doing this is to have your children who are receiving the bulk of the funds be successor co-trustee’s.  Thus, for example, if you have children from a prior marriage and you have a child from a current marriage, you probably want your spouse, your wife or husband, to be the first successor trustee.will and testament

When they pass away, you probably want children from both sides of the family to be successor trustees if you’re splitting the assets.  That way, they can make the decision about who gets what equally and fairly when your spouse and you pass away.  This allows fairness to happen.

Once the assets are divided into each of the kids’ or step-kids’ trusts, then each of them can step in and become their own sole trustee of the trust for their own benefit or their family line’s benefit.

This allows all disputes and distributions to happen up front as opposed to resentment building up over years.  I feel that if you lay things out clearly and there’s a good plan, the revocable trust will go smooth when you pass away.

Otherwise, resentment may build up and one child might say, “I didn’t get enough,”; or one grandchild might say, “What happened to MY piece!”.  This not only often leads to further generational resentment, but lawsuits as well.

prospertiyThe goal of an estate planning attorney is to avoid disputes at all costs when someone passes away.

Remember, in order to make things fair, it is always best to discuss with your estate planning attorney what you really want to happen when you (and your spouse if you are married) pass away.  Although there are many ways to try to make things go smoothly, I have found that discussing things up front is the best way to ensure fairness.

For your convenience, I have created a short checklist of who would be a good trustee and successor trustee when you pass away. Click here to access that checklist.

Remember, plan today… protect tomorrow.

Until Next Time,

Peter Blatt

Peter Blatt is the president at Blatt Financial Group. He has more than 17 years’ experience in the financial industry. He received a bachelor’s degree in accounting from Boston University, a law degree and a post doctorate degree in tax from the University of Miami School of Law. Peter formerly ran the financial planning department of a Trust Company in Palm Beach. He is an active member of the Florida Bar Association, the Palm Beach County Bar Association and the former secretary of the Tax Section of the Florida Bar. He is the founder of the North County Advisor’s Council.  He has been published or quoted in numerous periodicals including The Wall Street Journal, Yahoo Finance, SUCCESS Magazine and on Fox Business News.