Estate Planning and Choosing Trustees

estate planning checklists trustee trustee cheat sheet and checklist Jan 30, 2023

One of the most important decisions you can make in the estate planning process is choosing a list of trustees who will pick up the financial ball if you become incapacitated and who will manage your final affairs and distribute inheritances if you pass on. In fact, it is the first of what I call "The Big Four Questions" of estate planning. Things do not just automatically happen during an incapacity or after a death; someone needs to be in charge to make those things happen. (If you want the quick, one-page synopsis of this topic, check out the free Trustee Cheat Sheet and Checklist download at 

I once went through this topic with a client who was just refusing to name people to handle financial decisions (and it turned out that he didn't have anyone that he truly trusted). "Does Donald Trump have to name someone to do things for him?" he asked (and this was long before Trump ran for President.) "Trump says he wants a ham sandwich and Trump gets a ham sandwich."

"Who does he say it to?" I asked him. "I don't care how rich or important Donald Trump is, if he is standing in the middle of an empty room screaming at the top of his lungs that he wants a ham sandwich, it doesn't just magically appear. He has to tell someone to get him a ham sandwich. If you want your estate to be managed according to your wishes, then you need to have someone to carry out those wishes."

When choosing a list of trustees, usually for a revocable living trust plan, there should be at least three successor trustees named in succession. So what is the criteria for choosing good trustees for your estate plan? 

  • It needs to be a person you trust in general. Without that basic trust, there isn't a point to go further in considering them.
  • In addition to that personal trust, you should trust their judgment in financial matters, but they don't need to be financial experts. They have to have a basic grasp of financial responsibility, but at the same time they know to work with financial professionals to handle investing, taxes, and other matters.
  • They should also be in relatively good health, at least for the next 5-7 years, and there should be nothing that would disqualify them from serving as a fiduciary. This means that they have no felony convictions or any misdemeanor convictions for financial crimes like fraud, financial abuse, etc. While that criteria should be a no-brainer, occasionally people have close family members who were more "wild" in their youth who were now more than acceptable to handle these duties. However, these past criminal convictions can get in the way of financial institutions working with them. 
  • When it comes to estate planning, finding the people you trust to handle financial matters for you is critical since this becomes the list of trustees. However, this one question also leads to naming the Durable General Power of Attorney agent, the Executor of the Pour-Over Will, and the person who would be the "Conservator of the Estate" should you need a guardian assigned to you. (This is if you become incapacitated and needed a guardian, not who would raise minor children if you passed on). There are also some structural guidelines on what to avoid in the decision-making process which are just as important.
  • Do not name co-trustees. Experience has shown me that this is nothing more than extremely complicating matters with little to no benefit. Having more than one person at a time being responsible for the same job just has unnecessary conflicts, duplicative paperwork, and wasted time trying to gather multiple signatures when one person could have done the job just as well. Naming co-trustees is NOT a way to "spread the work around" since many financial institutions will insist on all co-trustees signing all paperwork regardless of whether or not the trust allows just one trustee to handle transactions (although this is often not the case with spouses setting up their own trusts as co-trustees).
  • Have at least three people named as trustees using the criteria above in succession in addition to any spouse or partner being listed first. This allows for multiple contingencies. In the about 27 years as an estate planning attorney, we have seen people go through two successor trustees passing on, becoming incapacitated, or refusing to take the job when someone passes on, but we have so far (knock on wood) never had this happen to three successor trustees. 
  • Naming someone who is a generation older than you as a trustee is not a deal breaker, but you shouldn't have all of your successor trustees be a generation or more older than you. If you have three solid trustees who are all a generation or more older than you, then go ahead and name them, but then add at least two more to the list who are your age or a generation younger.
  • The people you name should not be stubborn. By this I mean that despite being trustworthy and reliable that they will not venture out beyond their knowledge to try to do things that other professionals should be hired to do. The best example is a trustee who stubbornly spends hours upon hours trying to complete and file a 1041 trust tax return rather than hiring an accountant to do it properly.

Another factor that sometimes comes into play when naming successor trustees is when a person runs out of people they trust. In addition, we sometimes create generations trusts where the assets will be protected across multiple generations, so whomever is named as trustee is not statistically likely to be alive when the trust is finally closed out. What do they do then? What options are there? This is where a professional trustee should be considered, even if it is only a backup to the people you are naming. When that happens, there is an order of recommendations for the type of professionals to consider:

A trust company. Trust companies are just professional fiduciary trustees. Handling the tasks of investing, determining the needs of the beneficiaries, and using the trust funds appropriately and according to the terms of the trust is what they do.

Bank trust departments. Coming in a distant second are bank trust departments. While there are certainly exceptions, a lot of banks still have the reputation of liquidating everything, investing in bank CDs in their own bank (of course), and being stingy with distributing funds unless specifically called for in the trust instrument. The rationale for putting the money in their own bank CDs is they are "safe" investments because, obviously, they know their bank is safe. However, it can be argued that banks will put everything into their own bank CDs in order to bolster their own balance sheet.

Attorneys and accountants. While skill in being a trustee can vary greatly among these professionals, they often charge their usual hourly rate to work as a trustee, and this can become expensive. In my own experience, there is nothing an attorney or accountant can do better or more efficiently than a trust company and there is a big risk it could become much more expensive. 

As I have mentioned in past content, it is the goal of my law firm to provide good, solid estate and Medicaid planning information to the public. Part of that is accomplished through our law office website, these blogs, videos on the YouTube channel, and now in one-page downloads, including the Trustee Cheat Sheet and Checklist. If you are on your estate planning journey, then please check out these resources so you can make good decisions, and if you wish to set up an appointment, then please let us know by calling us at 919-844-7993. 




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