Creating a trust generally involves the intention of preserving assets for loved ones. Benefiting from a trust’s preservation might not be possible if the trust is not maintained properly. One of the many responsibilities of a trustee is ensuring proper paperwork is completed correctly and filed timely—both annually and throughout the term of the trust.
When establishing a trust, the creator might feel naturally inclined to name a trusted family member or a friend as successor trustee. Before making this decision one should consider:
1. Family conflict. Aside from challenges associated with trust administration that the trustee might face, personal conflicts among family members could surface. Issues of favoritism or resentment might surface in a family that had never experienced them before. Hiring an experienced third-party corporate trustee can separate family from administration and help prevent conflicts.
2. Liability. The trustee is the party responsible to beneficiaries for proper management of trust assets. Should the trustee make a mistake in trust administration, beneficiaries could personally sue the trustee. This is true even under circumstances when the trustee acts with the advisement of a hired professional adviser.
3. Time-consuming. As mentioned above, trustees are required to maintain and protect detailed records pertaining to the trust. Bill payments and critical tax deadlines might be a burden on a family member. Other duties that demand a trustee’s time include keeping beneficiaries informed, compliance with changing trust laws, accounting reports, and more. The time involved in basic trust administration might be overwhelming for a family member.
For individuals who are concerned about the actions of a trustee or who want greater flexibility in the event a trustee needs to be replaced, ask your asset protection attorney about trust protectors. Trust protectors in North Carolina are defined as power holders: “A person other than a trustee with power to take certain actions concerning a trust.” Provisions for naming a trust protector can be included in new trusts or, in some cases, added to existing trusts. These modern tools help remove and replace trustees without a lengthy court process, among many other benefits.
Choosing a non-familial trustee helps address the concerns above. This decision also offers the trust creator the opportunity to select an experienced and knowledgeable accountant, trust attorney or other professional to manage administration.
What if the trustee becomes incapacitated or dies before the trust term is complete? Learn about successor trustee responsibilities and discuss the possibility with an asset protection attorney.