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Choosing a Successor Trustee: Layperson vs. Professional

Posted by Zach Dana on February 12, 2016

choosing a successor trustee

choosing a successor trusteeDuring the process of creating a Living Trust one of the most crucial elements is choosing a successor trustee. A successor trustee of a Living Trust is the individual (or individuals) who takes over management when the original trustee (or trustees) has either passed away or is incapable of fulfilling their duties.

Much to their surprise, many people come to realize that choosing a successor trustee is more of a difficult decision than anticipated, and it makes sense. Selecting a person to bear the sole responsibility of ensuring that your final wishes and finances are carried out the way you want them to be is a weighty decision. The good news is there are several options available for you to choose from.

The first, and most common option is to appoint a layperson as the successor trustee. To put it simply, a layperson is someone with no professional experience or knowledge in being a successor trustee. Typically when a layperson is appointed as a successor trustee, they are someone who is well known by the original trustee, i.e. a child, a sibling, a close friend, etc.

The benefits of choosing a trusted loved one to be your successor trustee are great. First and foremost, although a successor trustee, professional or not, should always be offered payment for their help, many family members or friends who have been appointed as a successor trustees pass on the payment, making it a financially more sound choice for you. Second, choosing someone who knew and loved you (and probably also knows and loves your beneficiaries) means they are typically better equipped to understand your family dynamics and to have their interests align with yours.

On the other hand, selecting a layperson to be the successor trustee can sometimes be a bit of a bumpy road. For instance, if you are incapacitated, being appointed as your successor trustee has just become a huge time commitment. Depending on where they were at in life, some appointed laypeople just don’t have the means and/or the will to step up to the role as your successor trustee. Unfortunately this can never be 100% avoided because you can’t predict where people will be at in life when the time comes for them to be the successor trustee. However, by selecting a layperson that is honest, responsible, detail oriented, and a good communicator you are increasing chances for success.

But perhaps the biggest bump that can arise from naming a layperson as your successor trustee is the possibility for family conflicts to arise. Once again, this issue can typically be avoided by selecting your layperson successor trustee based on their characteristics and dynamics opposed to how much of a financial expert they are, as that guidance can be provided by someone, such as an trust administration attorney. In fact, in an attempt to avoid any potential conflict the best thing you can do is talk to people who you’re considering as selecting and get their thoughts and feelings (even consider hearing your beneficiaries thoughts and feelings as well). Still, we know that no families are perfect and some are even more prone to conflict so if you’re still unsure about who could be a good layperson successor trustee there is always option number two!

The second option available when choosing a successor trustee is to hire either the trust division of a bank or a private trust company. In most cases, a professional successor trustee uses their experience, knowledge, and skill to administer the trust in an unbiased and well-determined manner, something that is not always possible with a layperson. However, with that said, the benefits of hiring a professional trustee successor come with a high cost. To many, especially those with a simple living probate-avoidance trust, paying such a hefty price (on average 1% of all your assets) for the professional experience simply does not make sense. In addition, others stray from the professional choice due to the possible issues of impersonal management, insufficient communication/decisions, and disinterest due to lack of personal interest/stake. This leads us to option three.

The third option available when choosing a successor trustee is to name co-successor trustees. Co-successor trustees can be multiple laypeople, or a layperson and a professional, etc. Although co-successor trustees have their own set of issues, for some the combination of professional management with family input is the best of both worlds.

In the end, the decision is up to you. For some their peace of mind comes from knowing familiar hands are handling their assets. For others, their peace of mind comes from knowing someone who knows what they are doing is in charge. The point is if it’s the best option for you and your beneficiaries, then it’s the right option. For guidance when selecting a successor trustee or to simply get started on your trust, contact Dana Law Group, Arizona’s experts in estate planning, today.