As an trust and estate attorney, I would like to share with you my experience in recent cases that I have handled where clients have made unfortunate decisions in selecting executors or trustees to handle their affairs. Remember, a trustee administers a trust, and an executor administers the terms of a will.
Clients often ask, “Whom should I name as executor or trustee?” There is no one right answer. It depends on many factors, including what the executor or trustee is expected to accomplish, whether the trust is revocable or irrevocable, who the beneficiaries are, and other factors.
I. Executor/ Trustee Responsibilities and Duties
Here are some of the most important duties of a trustee:
- Legal. Seeking counsel as needed, the trustee assumes legal responsibility for proper trust administration.
- Bookkeeping. The trustee establishes record keeping procedures, performs ongoing accounting, submits records for review if needed, takes inventory, changes titles of assets received, and pays bills.
- Custody of Investments. This includes both planning and administrative duties. In addition, the trustee must collect assets and related income and maintain detailed records of all transactions. Each type must be managed appropriately. The trustee:
- Holds securities or other property in appropriate title.
- Recommends such investments (purchases or sales) or other transactions for the estate in the best interest of the estate, subject to the powers granted under the terms of the will or trust.
- Taxes. The trustee must manage investments with tax considerations in mind, and track asset acquisition dates, cost, and adjustments, keep records of taxable income, file annual trust tax returns, and provide information to beneficiaries for their tax records.
- Estate Distribution. The trustee must communicate regularly with beneficiaries, distribute income and principal to them as outlined in the trust terms, and provide detailed account statements. For living trusts, the trustee must settle the estate by preparing tax returns, discharging creditor obligations, determining final distributions, and arranging final asset transfers. The trustee or executor also:
- Ascertains extent of liabilities and payment of correct amounts.
- Raises sufficient cash to meet all estate liquidity requirements.
- Completes division and distribution of estate assets in accordance with plan.
- Completes cash accounting from date of plan to date of distribution.
II. Should you consider naming an individual, a trust company, or both?
You need a trustee and executor with discretion, good judgment, commitment and integrity. You likely have family members or close friends with these qualities. But the trustee’s job is complex, often involving years of detailed research and record keeping, and informed decision making. That’s why many clients choose a professional trustee alone or as co-trustee with an individual trustee. A professional trustee has the necessary experience and expertise, access to resources, and time to carry out the trust terms. So do some individuals.
Individuals can obtain professional advice when needed, but a professional trust company has additional advantages over an individual trustee:
- Continuity. An individual can be limited by health, longevity, or even a busy schedule. A trust company can ensure continuous management.
- Impartiality. A professional trust company CAN SAY NO! and is not swayed by self-interest in the interpretation of trust provisions or management and distribution of assets. Even if family members or other individual trustees would be impartial, others may perceive their actions as self serving.
III. When you should consider naming a professional trust company as executor or trustee
- Your family or friends are more elderly or are not capable of handling the task.
- This is too great a burden for family members or friends.
- You have a long term trust that may last for many years (for example with young children).
- Trusts with behavior incentives.
- Where there is diversity or differences among the beneficiaries.
- Where the trust attempts to protect beneficiaries from themselves.
- Where beneficiaries or family members do not relate well with each other.
- Trusts funded with marketable securities or complicated assets.
- Supplemental needs trusts for disabled beneficiaries.
It is essential that you select a trustee or executor who can carry out the terms of the trust or will and also help you achieve your objectives. We would be glad to answer your questions about trustee and executor responsibilities. As an trust and estate lawyer, I can counsel you about trust and executor selections, as well as other choices you must make. Our office has a strong working relationship with many trustees including several professional trust companies and, we can guide you in the selection of a professional trust company if that is the approach you wish to take.
Please call me if you have questions or call my paralegal Lori (847-563-4887) to set up an appointment so you and I can review your trustee or executor selections. You have the power to choose; use it wisely.
*This document is for discussion purposes only and is not intended to be construed as legal advice. You should never attempt estate planning without the advice of competent legal counsel. Please feel free to contact our offices if we may assist you.**
Copyright 2007 THE LAW OFFICES OF ANTHONY B. FERRARO, Rosemont, Il.