Monday, July 7, 2014
Estate planning has become largely obsolete given the high federal estate tax applicable exclusion amount. However, in a post-American Taxpayer Relief Act of 2012 world, non-estate planning considerations should receive more attention.
One of the most important aspects of designing an estate plan is carefully identifying who would be most qualified and effective in the roles of trustee and successor trustees. Although lawyers can prepare superb estate planning documents, if the fiduciaries entrusted to implement the directives are inappropriate, the client’s goals are unlikely to be achieved. There are many factors that should be taken into consideration when selecting a trustee.
- Does the individual possess sufficient expertise to do the job? The trustee is ultimately responsible for exercising prudence in selecting the agent, establishing the scope of the delegation and periodically reviewing the agent’s actions.
- Is the trustee independent, or is there a conflict of interest? The trustee could have a beneficial interest in the trust or they could have a personal economic interest in the trust.
- Will the trustee see the job through? Age and health of the trustee is important to take into account.
- Where is the trustee located? Having a trustee close to beneficiaries may be advantageous to smooth trust administration.
- Does the trustee expect compensation? It is important to consider cost of trust administration because it is never free.
- Is the trustee accountable? If the trust experiences losses caused by the trustee’s malfeasance, the trust and beneficiaries can be made whole if a corporate fiduciary is serving or if an individual trustee is bonded.
See Charles Redd, Tips From the Pros: The Most Disrespected Decision in Estate Planning, Wealth Management, June 24, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.