Trusts are not just for the wealthy. They serve many purposes and solve specific problems that may have little to do with wealth, focusing more on family dynamics. As you think about your estate plan and passing your assets on to your loved ones, consider the following questions:
- Would you prefer to keep your affairs private and help your loved ones avoid probate court?
- Have you remarried and now have a blended family?
- Would you want to leave any money to your favorite charities?
- If you own a small business, do you worry about liability?
- Do you have a child with special needs?
- Do you have an elderly parent who might need government benefits?
In essence, a trust is a legal arrangement that can own assets. It not only outlines instructions for who will handle your final affairs, but also who receives your assets after you die. A well‑designed trust holds your most significant assets, protects them, and eventually transfers them to your loved ones. There are numerous types of trusts to fit various situations. You create the trust and fund it.
You may opt to act as the trustee during your lifetime. Or you can choose a third party, or trustee, to manage and administer your funds before and after death. The individual you name as a trustee can find professionals to help them with the tasks involved. In fact, one option is to hire an experienced corporate trustee to manage your trust. Trustees must provide beneficiaries with regular accountings of investment activity until you pass and your estate is settled. Choosing the right one is critical.
Trustees assume a fiduciary role and must carry out the terms of the trust in the best interest of your beneficiaries. They need to have some experience with estate administration and finances or hire someone to advise them. An inexperienced trustee may become overworked and overwhelmed. The wrong trustee can be intentionally uncooperative, abusive, or dishonest, which could lead to litigation. If a trustee is not living up to their duties, your beneficiaries can request a copy of the trust documents as well as records of estate transactions. Beneficiaries have the right to know where trust funds have been placed, how much income the funds have earned, and how much the trustee has spent on expenses and commissions. If your trustee has not provided you with an accounting, ask politely in writing and give them a reasonable timeframe to comply. Having an estate planning attorney send a letter may do the job. There may be a simple matter of miscommunication between the trustee and heirs. Your attorney can identify the problem and work things out amicably. If they find this is not possible, they may advise you to go to court.
Some problems may prove more difficult to resolve. They may require litigation with an estate planning attorney who is familiar with current trust administration and litigation laws in your state. They can determine if the trustee has mishandled the estate or breached their duties.
One alternative is to name all of your adult children as successors, but instead of having them work together as co‑trustees, list them in order of who you think will do the best job. Only your first choice would become your successor; if that person is unable or unwilling to serve at that time, then the second child would step in, and so on down your list. If you want to name an even number of your children to act together, you could select just one to make decisions. Or you may want to add a corporate trustee (a bank trust department or trust company) to prevent any deadlocks if your children disagree. If your children agree, the corporate trustee could not overrule them. Remember, taking over as trustee for someone can take a great deal of time, requires some business sense, and carries significant legal duties that cannot be taken lightly. Be sure to consider your children’s personalities and motives, financial or business experience, and time available due to their own family or career demands. As much as you love your children and would like to think they will be caring and unselfish when you’re not there to referee, this is the time to be realistic. If they really don’t get along, or if there could be jealousies, you and your family will be much better off with a professional as your successor trustee. The fee they charge is a small price to pay if it keeps peace in your family.
If you would like to lean more, or set up a complimentary estate planning consultation with one of our Madison, Wisconsin estate planning attorneys, please contact us and we can schedule a time to meet.