Many estate plans contain revocable living trusts (or trusts which can be changed or terminated by the creator). These trusts later become irrevocable (cannot be easily changed or terminated) when the trustmaker, also known as the Grantor, dies. Such trusts may benefit the surviving spouse during their lifetime and may continue for the benefit of several additional generations. Because these trusts can be designed to span multiple decades, it is crucial to choose the right successor trustees.

Do Your Chosen Successor Trustees Have to Act Right Away?

When you create your revocable living trust (often called an RLT), it is common to name yourself as the initial trustee. You will still be in charge of managing your accounts and property as you see fit while you are alive and well, but the trust becomes the legal owner of those accounts and property instead of you as an individual. However, you will likely also be the beneficiary of the trust while you are alive, so you will be able to benefit from the trust’s accounts and property throughout your lifetime. With this arrangement, your successor trustees do not act yet.

Successor Trustees typically step in during the following scenarios:

• After you pass away.
• After you become incapacitated (unable to manage financial affairs).
• Successor Trustees can also step in, should you decide you would like to resign or having someone act with you as co-trustees.

Should You Name Family Members as Your Successor Trustees?

Your trust is intended to continue for years, so choosing the right succession of trustees is critical to its longevity and ultimate success. This is due to the amount of responsibility that successor trustees often shoulder when they are serving during your incapacity or when they are administering your trust on behalf of your descendants and beneficiaries.

You may assume that a family member, such as your spouse, a sibling, or an adult child, will be the best person to serve as the trustee of your trust when you no longer can. You may think family members will better understand the varying needs of your beneficiaries and keep the costs of administering the trust down. There is some valid points to this argument. However, there are times when family members may not be the best choice as successor trustees.

Pros of Family Serving:

• Greater familiarity with beneficiaries (their needs, quirks, and foibles)
• Greater privacy overall
• Lower cost of administration

Cons of Family Serving:

• Family members may not have sufficient time to devote to managing the trust
• May lack experience managing large amounts of money or complex investments
• Can cause tension between family members if one person is tasked with “holding the purse strings”

If family members are not the best option for your successor trustees, you may be able to choose a corporate or professional trustee. One advantage of selecting these types of trustees is that they can often meet all fiduciary obligations under one roof for a specified fee. In addition, a corporate or professional trustee will act in an unbiased manner when making distributions and investments, which will benefit current and future beneficiaries. This option can be beneficial if you have a blended family and would like to provide for your surviving spouse while having anything that is left over held for the benefit of your children from a prior relationship. In situations like this, you may not want your surviving spouse or child from a previous relationship to be in charge of managing the money because they could have conflicting priorities. Also, a corporate or professional trustee will not get sick or be too busy to oversee the trust’s day-to-day administration.

Should You Give Your Beneficiaries the Power to Remove and Replace Trustees?

Forcing your trust beneficiaries to be stuck with the wrong trustee without a reasonable means for removing and replacing them may cause an expensive visit to the courthouse.

It may be necessary to build provisions into your trust agreement that will allow your beneficiaries or an independent third party, such as a trust protector, to remove and replace the trustees without court intervention. The fact that the trustee can be removed and replaced without going to court is often an incentive for the trustee to work out any differences with the beneficiaries. On the other hand, to prevent beneficiaries from removing trustees without valid cause, you might prefer to involve the court if a trustee needs to be removed.

What Should You Do?

Selecting your successor trustees is one of the most important decisions you will make when creating a trust. Though family members or loved ones may be your initial choice, you should give serious consideration to designating a corporate or professional trustee, either alone or as a co-trustee with a family member or loved one. Discussing the pros and cons of both family members and corporate trustees with an experienced estate planning attorney can help when making this decision for your estate plan.  Nielsen Law PLLC provides family-focused estate and business planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information, and to learn about our firm, please contact us. We look forward to working with you.