When creating or updating an estate plan, the significance of choosing the appropriate person or persons to act as estate trustee is often understated. The individual who is ultimately selected will be charged with administering your estate upon your death and, as a result, it is crucial that he or she is not only capable of doing so, but that the person selected is someone whom you can trust to uphold your final wishes to the best of his or her abilities.
In making this determination, there are several factors that should be canvassed. First and foremost, the decision should be made from a business standpoint as opposed to an emotional one. For instance, it is not typically wise to base the selection exclusively on family ties. Although a particular family member may be especially close to you and you may trust this person deeply, he or she may not be the one best suited to the position of estate trustee without possessing other characteristics as well. These types of appointments can become problematic when the estate trustee lacks the skills required to effectively administer the estate.
Choosing an estate trustee is akin to choosing a president to run your company. The decision should be approached with this mindset, such that you are looking not only for trustworthiness, but for competence in the ability to organize resources and with leadership skills necessary to effectively manage the other individuals involved in the administration. Too frequently, a testator will automatically select his or her spouse or child(ren) to act as estate trustee(s), without proper consideration of whether they are suitable for the role. In taking a business approach to estate planning, the estate trustee will not simply be the person with whom the testator is closest, but will be the person who is most capable of tending to the administration of the estate.
Testators have the option of appointing one or multiple estate trustees. This can sometimes allow for a balance between various areas of expertise and competing interests. For instance, a family member can be selected along with a lawyer or an accountant. However, it is important to keep in mind that selecting multiple estate trustees can also bring its own unique set of challenges to an estate administration.
One concern that may emerge with respect to selecting multiple estate trustees is choosing the appropriate number. For example, two estate trustees is often not ideal, as a majority rules clause simply will not work without a third person to break a tie, and may result in a stalemate requiring the intervention of the Court. A testator also has the option of appointing multiple estate trustees jointly (all decisions must be made together), jointly and severally (permitted to act together or unilaterally), or by majority decision-making.
Alternatively, having more than one (and certainly more than three) estate trustees can unnecessarily complicate matters. Even in large and complex estates, too many estate trustees can sometimes have unintended effects as a result of there being too many competing voices and ideas rather than a more simplified and streamlined process. Three estate trustees often strikes a good balance between these two problematic scenarios. However, as each estate is unique and may have different needs and requirements, legal advice on how best to approach a specific set of circumstances is recommended before making these types of determinations.
Once the decision with respect to the choice of estate trustee has been made, it is important to communicate this to the individual(s) selected. All too often, people avoid these difficult conversations, which can lead to interpretation issues with respect to the administration of the estate. Taking the time to sit down with the named estate trustee(s) before or immediately after naming him or her in a new will can be key to ensuring that your final wishes are upheld. Often, this meeting not only allows the opportunity to inform the estate trustee(s) of the selection, but also to express any specific direction as to discretionary decisions they may be charged with making upon death. Trustees may be granted significant discretion, including the discretion to make funeral arrangements as he or she considers appropriate and directing payment of income and capital to beneficiaries of any discretionary trusts.
Finally, it is wise for individuals selected to act as estate trustees to make themselves aware of the responsibilities that the role entails early on in order to avoid any improper actions being taken immediately following death because one is not aware of one's obligations. An estate trustee is considered a fiduciary with obligations to the estate and its beneficiaries. Many of the first steps that will be taken by an estate trustee may inadvertently trigger personal liability and they should be sensitive to the higher standard under which they are expected to execute their duties. If not otherwise fully informed as to these obligations, an estate trustee should consider obtaining legal advice to ensure adherence to all relevant obligations.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.
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