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  • Writer's pictureJacob Williamson

Mastering Trustee Selection: Expert Tips for Effective Estate Planning

Choosing a trustee is a critical estate planning decision. While some consider appointing a family member, it is generally advisable to avoid this choice. Family member trustees often lack awareness of their fiduciary duties, leading to conflicts and legal battles. As a grantor, you are responsible for selecting a successor trustee to manage trust assets. This decision holds immense significance in estate planning.

Although the inclination may be to choose a family member due to the personal bond and assumed understanding of your wishes, the risks outweigh the benefits. Family member trustees can strain relationships within the family, especially when beneficiaries are involved. Disputes over the distribution of trust property can permanently damage familial ties, particularly in cases involving a surviving spouse and children from a previous marriage.

Moreover, appointing a family member as a trustee increases the likelihood of breaches of fiduciary duty. They may lack the necessary knowledge, training, and financial expertise to fulfill their obligations. Common breaches include self-dealing, conflicts of interest, retaining unproductive assets, imprudent investments, failure to diversify, violation of the duty of impartiality, and ignorance or disregard for administrative responsibilities. Such breaches can result in expensive and time-consuming litigation, straining family relationships further.

When family member trustees breach their fiduciary duties, the consequences are severe. Relationships often deteriorate, and beneficiaries have the right to sue. The ensuing litigation can lead to the removal of the trustee or imposition of surcharges, forcing the trustee to compensate the beneficiaries for losses incurred. Although specific fiduciary duties can be waived, the interpretation of waivers by courts is unpredictable. Professional trustees, with their expertise and deep understanding of fiduciary duties, are better equipped to administer trusts effectively.

There are specific scenarios where appointing a family member as trustee is particularly difficult. Support trusts, discretionary trusts, and situations involving the power to decant carry higher risks. Support trusts often result in disagreements between trustees and beneficiaries, as interpretations of "comfortable maintenance and support" differ. Discretionary trusts grant trustees considerable decision-making authority, which can lead to conflicts among family members. Decanting, allowing trustees to transfer the trust property to a new trust with updated provisions, may cause conflicts if beneficiaries perceive a departure from the settlor's intentions.

In conclusion, although the temptation to select a family member as a trustee is understandable, the potential risks and complexities make it advisable to choose a professional trustee. Professionals possess the necessary knowledge and experience to navigate fiduciary duties effectively. By prioritizing the long-term success of the trust and maintaining family harmony, grantors can make informed estate planning decisions that safeguard both assets and relationships.

Suppose you're looking for where to start regarding estate planning. Contact Jacob Williamson to help get you in touch with a qualified professional.

Jacob Williamson Realty Century 21 Affiliated | Realtor 714-408-5379 DRE 02179062



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