Planning Prevents Problems
Last month, I wrote about the decision many have made to form trusts as their plan to transfer property within the family. This month, I am writing concerning one of the most common problems stemming from a poorly crafted family trust: Who is going to be the trustee after Mother and Father pass?
Most trusts are controlled by the makers of the trust during the makers’ lifetimes. These are called revocable or living trusts. Usually, Mother and Father are the trustees during their lifetime. But upon their passing or inability to handle the duties of a trustee, someone called a successor trustee is responsible for making sure that Mother and Father’s desires are carried out. Usually, this involves distributing the property in the trust to the children and grandchildren.
It is common for Mother and Father to name one of the children, perhaps the oldest or the one who lives closest, as the successor trustee. If the family gets along well, the process can go very smoothly.
However, if the children do not get along, then friction can build. I have spoken with successor trustees in this situation who have wondered, “Why did Mother and Father ever saddle me with this burden?”
If there is a potential for friction among the children who will obtain the property of the trust, called beneficiaries, and/or if there is property that needs specialized skill in managing (for instance a business or a child who cannot handle money), it may make sense for Mother and Father to consider appointing someone from outside the family, such as a corporate trustee or a trust department at a local bank, as successor trustee to preserve peace in the family.
Thomas D. White