Who will carry out your wishes if family’s not the answer?

Choosing the right person to manage your affairs when you die or if you become incapacitated during your lifetime is not easy. Each of us should spend as much time on choosing fiduciaries as we do on any other part of our estate plan, especially if you are not married or do not have family members available to step in to do the right thing and follow your instructions.

Your parents, children or siblings may either not be available, or not the right fit. Or maybe you feel like those who would be available lack the knowledge, discipline or time required to effectively oversee financial matters. The process of managing your affairs when you are no longer able can be quite complicated. Therefore, please do not underestimate how extremely important it is to select capable fiduciaries. The world’s finest (or most expensive) estate plan will crash and burn, resulting in years of expensive litigation, if the right fiduciary is not chosen at the outset.
Typically, the decision-makers you need will include:

• A successor trustee to administer revocable trusts for which you are responsible during your lifetime if you become incapacitated and distribute any remaining trust assets or continue administering the trust (depending on its terms) when you die.
• An agent appointed as health care power of attorney to make health care decisions on your behalf in the event of incapacity.
• An agent appointed as financial power of attorney to make financial decisions for you related to any assets held outside of your trusts (e.g., retirement accounts, brokerage accounts and personal bank accounts).
• An executor to handle the settlement of your estate and the distribution of any assets held in your individual name upon your death. You may feel like you are bestowing an honor upon the individual you are asking to fill one of these roles, but the position is almost nearly always time consuming, complex, and fraught with liability and emotion (e,g., “Mommy always loved you best!”).

Think about everything that will be required to settle your estate after you die. Your executor or trustee is likely to need at least six to 18 months to:

• Identify, collect, value and sell all your assets
• Pay all outstanding debts, liabilities and expenses
• Ensure that all assets are managed prudently and in line with your estate’s distribution and liquidity requirements
• Prepare and file all estate tax returns, income tax returns and court-mandated filings
• Distribute assets according to the terms of your will and trust documents

These responsibilities not only take time, they also require careful attention to detail and financial knowledge. Your trustee or executors may also need to make difficult asset distribution decisions, such as when tangible property needs to be divided among your beneficiaries. And keep in mind that any errors or omissions could subject your fiduciary to personal liability. Take the time to make an honest evaluation and have an up-front conversation about your intentions. Make sure the individual(s) you have selected are not just able to perform the required duties—but also are ready and willing to carry them out in the face of stiff family resistance.

Understand the benefits a corporate trustee can provide

Traditionally, corporate trustees were often thought of as a last resort—when no family members or trusted individuals were around to act, or pre-existing family conflicts necessitated an independent, neutral third-party. Today, a corporate trustee, like Fiduciary Trust International, is often chosen even when competent individuals are available. We are selected because of the expertise, knowledge, unbiased objectivity and professionalism a corporate trustee brings to the table from handling thousands of different trusts and estates. And corporate trustees are able to offer extensive in-house and third-party expertise to effectively manage even the most complex assets.

Please know that choosing between an individual or corporate trustee is not a binary, either/or decision. Instead, involving a corporate trustee gives you flexibility to create a structure that works best for your particular needs, for example:

• An individual and a corporate trustee acting as co-trustees for your trust—where the corporate trustee can assume all investment management responsibility and the bulk of the day-to-day administration, but other significant decisions, such as discretionary distributions, are shared.
• A corporate trustee as agent for an individual trustee or executor—where all decision-making power lies with the individual but the individual hires the corporate trustee to do all or a portion of the work of the trust or estate administration.
• A corporate trustee for specific assets—where the corporate trustee is responsible for managing particular assets like real estate or an art collection that needs to be sold, or the corporate trustee may be responsible for the management of long-term financial assets while an individual is responsible for the personal assets being used by the beneficiary.
• A corporate trustee with beneficiaries able to act at a certain age—where the corporate trustee has all current responsibilities, but the individual beneficiaries can elect to become a co-trustee when they reach a certain age.
• A corporate trustee or executor with individuals as agents—where the corporate trustee assumes responsibility for your major assets upon your incapacity, but individuals are in charge of all personal decisions, including health care and day-to-day financial decisions.

In sum, a corporate trustee provides capacity, competency and objectivity for those situations where the facts and circumstances suggest that no one individual has those capabilities.