No matter what level of wealth you have, it’s important to think about how you want your estate handled when you pass or in the event you become incapacitated. Preparing your estate now can help ensure that everything ranging from your house to your retirement savings is given to others according to your wishes.
A key part of estate management includes assigning a trustee, who acts as the legal owner of your estate’s assets and is responsible for distributing those assets according to the terms you lay out. For example, if you specify that you want the proceeds from your home evenly distributed among your children, the trustee would be responsible for selling the house and would have the authority to make decisions such as choosing the listing price.
Without a trustee, your children or other heirs may be left to manage this process on their own. This can cause disagreements over how to sell the house or lead to issues such as one child claiming they deserve a larger share of the proceeds for doing more work in selling the house—which could result in legal action.
To avoid such issues, you should find a good trustee. This role often includes financial management, such as paying taxes properly, managing investments, and selling property as necessary. It’s often prudent to choose someone with experience in this area, though you can essentially choose any adult ranging from your spouse to a neighbor to a colleague.
To choose the right trustee for your estate, consider the following factors:
As the word implies, it’s crucial to choose a trustee that you trust, as you need someone who can provide seamless management of your estate and carry out your wishes as intended. Moreover, you want the peace of mind that your trustee will not act improperly, either intentionally by embezzling assets or by negligence in mismanaging assets.
You may think that family members make for good trustees given the trust you’ve established with them. However, you’ll need to decide whether a family member can be objective enough to make decisions that could otherwise be emotional, such as selling assets like a house or jewelry that have been in the family for a long time. A third-party trustee may be removed enough from the situation to focus on making the best financial decisions for your estate.
Related to objectivity, consider the independence of your trustee in terms of being able to make decisions on their own, without being swayed by others. For example, if you appoint one child as a trustee, perhaps because they have a legal background, their siblings may still disagree with their financial decisions or feel resentment based on not being in control of the trust, which could affect the decisions the trustee makes. That’s why many people instead choose a professional fiduciary as a trustee who is not otherwise connected to the family and is free to exercise their authority independently.
Lastly, consider the experience of a trustee in managing estates so that you can be confident they will do a good job managing your own. Choosing someone with experience can also help instill confidence in family members, who may then be more willing to accept this trustee’s decisions, rather than challenging their choices and causing conflicts.
By focusing on these factors, you can choose the right trustee to manage your estate according to your wishes. In particular, a professional fiduciary tends to check all these boxes and can often serve related roles for you, such as that of a conservator who also manages your personal affairs in the event you become incapacitated.
Whoever you choose, consider this decision carefully as it can not only affect how your legacy is handled but also how your family navigates through the distribution of your estate.
Discuss your situation with a California licensed professional fiduciary.