Developing an Estate Plan: Designating a Trustee
Developing an Estate Plan: Designating a Trustee
By: Stacey Nickens
Planning for the end of your life can be emotional and challenging. However, the pandemic has shown us the importance of developing a roadmap for a variety of scenarios. In the event that you are incapacitated, having a trust can help your family and friends better manage your assets, fulfill your wishes, and complete your obligations. A trust will allow you to rest peacefully knowing that you have outlined your wishes. A trust will also make life easier for your family members. A trust simplifies the inheritance process and ensures your family has fewer loopholes through which to jump.
What is a living trust? A living trust puts your assets in the name of a trust. You become the grantor of the trust as well as the original trustee. You’re the trustee as long as you’re making decisions about the trust. The trust will include instructions on how to manage the trust in the event of your incapacity or death, and these steps will be carried out by your successor trustee or trustees.
What are a trustee’s responsibilities? Your successor trustee will follow any directions that you outline in the trust. These directions generally ensure that the trustee….
- Uses necessary trust funds to meet your expenses, pay your bills, and fulfill your obligations.
- Manages your assets according to the manner in which you outlined.
- Files a tax return for the trust’s assets.
After you pass away, the trustee should generally…
- Meet with an estate-planning attorney as well as an accountant to review the trust’s instructions and assets.
- Apply for a new Employer Identification Number for the trust through the IRS.
- Collect death benefits and place those benefits in a separate trust until your assets are distributed.
- Notify financial service firms holding or managing the trust’s assets.
- Keep records of the trust’s expenses, bills, and taxes. The trustee will provide an accounting summary to the trust’s beneficiaries.
At this point, the trustee will either continue to manage the trust’s assets or distribute them accordingly.
Who should be your trustee? You can pick multiply trustees; however, they will all have to agree on each trust-related decision. Selecting one trustee may involve less conflict. Regardless of who you select, you will want to choose someone responsible and organized enough to manage the complex obligations that come with being a trustee. Additionally, if you have significant family conflict, you may select a corporate trustee, such as a bank trust department. Keep in mind that corporate trustees are generally more expensive and more inflexible.
Should you pay your trustee? Trustees fulfill many obligations, so you can specify that your trustee receives some compensation. Review your state’s laws to see if there are any statutes that limit executor or attorney commissions for estate management. Corporate trustees often charge a fee equal to 1%-2% of the trust’s assets.
If you are interested in learning more about trusts, reach out to ELM#3 in order to set up an estate planning consultation. We are here to ensure that your financial wishes are fulfilled and that your family’s needs are met.
