Trusts are commonly used tools in Medicaid and estate planning. When creating a trust, one important decision is the selection of an appropriate trustee and successor trustee. There are many factors to consider when choosing a trustee. The following are several points to contemplate when making this decision:
- Needs of the beneficiary: Each trust is created for a different reason and with a specific beneficiary in mind. First and foremost, it is critical to consider the needs of the beneficiary when selecting a trustee.
For example, a disabled beneficiary who is not capable of asking for financial assistance may need a trustee who is more involved in his/her life so that the needs of the beneficiary can be ascertained firsthand. It is essential that the trustee be able to make financial decisions that will enhance the life of the disabled beneficiary.
On the other hand, a beneficiary who is a spendthrift may need a trustee with a stronger hold on the trust account who can withstand the often incessant demands of the beneficiary.
- The characteristics and expertise of the trustee: A trustee can be a lay person or a professional such as a corporate trustee or an attorney. While a corporate trustee or attorney usually has the experience and staff support to carry out the administration of a trust, the cost may be prohibitive for a small-sized trust.
In addition, a corporate trustee often lacks personal knowledge of the beneficiary and may not fully understand what may be best for the beneficiary. Conversely, a professional trustee may be necessary to avoid family conflicts and the mismanagement of trust funds.
It is common to name lay individuals, often family members and friends, as trustees. However, even a lay person should have some basic abilities.
The trustee should be somewhat business savvy because he or she is entrusted with the management of the assets. The trustee should be organized and at least have the wherewithal to seek appropriate professional help and guidance when needed. For example, an inexperienced trustee can and should retain the services of a competent financial advisor to manage the assets of the trust, and should also retain a good accountant and attorney to handle financial and legal issues as they arise.
A trust oftentimes lasts for the lifetime of the beneficiary, and years of financial records should be kept and organized. Obviously, the more complicated a trust is, the more sophisticated the trustee should be. Of course, the trustee must be impartial with regard to all the beneficiaries.
- Potential trustee’s willingness to serve: When an individual is selected as a potential trustee or successor trustee, it is important to ensure that the person wishes to serve in the capacity as trustee.
Individuals are often honored to be selected as a trustee, but have reservations about serving until they understand exactly what is involved. The attorney creating the trust should be available to discuss the attendant responsibilities with the potential trustee.
The selection of a trustee and successor trustee is an important decision which is often made based on the type and purpose of the trust. An experienced estate planning and elder law attorney can assist with these and other selection considerations.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that exclusively concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Yan Lian Kuang-Maoga, Esq. is an elder law attorney with the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also the co-founder of JR Wealth Advisors, LLC. The wealth management firm can be reached at 516-466-3300 or 800-353-3775.