Choosing a successor trustee can be one of the most important decisions you make in designing your trust because it can affect the lives of your beneficiaries for several years. While grantors often select family members, friends, or even family attorneys to be successor trustees, many factors should be considered when selecting a successor trustee for your trust. An estate planning attorney in Maryland can help you choose the one that will best suit all of your long-term goals.
Most estate plans have an initial trustee as well as a contingent or successor fiduciary, and initial fiduciaries can be named explicitly in the governing documents. Successor trustees may be specifically named in estate planning documents, but successors can also be chosen later by beneficiaries, family members, or even a local probate court.
Factors to Consider when Determining Who Your Successor Trustee Should be
Responsibilities of a Successor Trustees
A successor trustee or fiduciary can play an important role and could be called on following the death or incapacity of a grantor. A successor trustee will have such duties as gathering and evaluating assets, deciding on various investment strategies, and exercising control over various businesses and business interests.
A trustee could also have to deal with different kinds of income and estate tax matters, such as the preparation of an estate tax return. A successor trustee will also have to allocate trust assets among the various sub-trusts and separate shares, possibly created by the terms of a living trust.
After sub-trusts have been set up, a trustee has to administer these trusts for the benefit of the designated beneficiaries. Although a trustee will be bound by fiduciary duty to all the beneficiaries, a trustee generally has a large amount of discretion, including in distributions to or for the benefit of the trust beneficiaries.
Trust assets being held in trust are to be distributed at a trustee’s discretion and may have specific purposes that help guide the trustee. A common purpose is the ascertainable standard, in which the trustee, at their discretion, makes distributions for the health, support, maintenance, and education of the beneficiaries. Distributions being at the trustee’s discretion can raise concerns about trustees exercising discretion fairly and reasonably.
Investment and Asset Management Risks of Selecting Trustees
Until a trustee distributes all assets to beneficiaries, their duties will be to manage, invest, and dispose of trust assets. A trustee has to determine how to invest liquid assets for current income or for long-term growth.
Other issues may arise if a trust holds a controlling interest in a closely held business or assets that could require hands-on supervision. You need to ask if a trustee will have the necessary time and knowledge to deal with such assets.
Any disruption to investment management could be costly, so estate planning conversations must clarify how a relationship will be managed, now and in the future so that a grantor’s wishes can be fulfilled. Certain events may result in a grantor’s investment professional losing a relationship due to a change in trustees or another financial institution being named in the document that was not the grantor’s intention.
Clients and estate planners can name banks as trustees and/or executors in estate planning documents or successor trustees to clients for some point in the future. Such an event may not occur for several years, making this a future appointment.
Several people have close relationships with financial institutions, and it thus becomes their desire to assure that the same people will continue to manage their assets for their children as the institutions did for them. Individual trustees may choose someone else to manage assets, but the continuity of investment management will be more likely to remain if a grantor names a financial institution they are currently working with.
Call Us Today to Schedule a Free Consultation with a Maryland Estate Planning Lawyer
If you need help determining the best possible successor trustee for your trust, make sure that you have skilled and experienced legal representation. The Law Offices of Clifford M. Cohen, an estate planning law firm in Washington DC has been serving clients in Washington, D.C., Rockville, Bethesda, Chevy Chase, Silver Springs, Potomac, Germantown, Gaithersburg, and Takoma Park, Maryland, for generations.
Our firm takes the time to listen to all of your concerns and then can outline all of your options in a clear and easy-to-understand way. You may call (202) 895-2799 or contact us online to take advantage of a free consultation that will let us thoroughly review your case and further discuss how we might be able to serve you.