Financial Health Adds to Peace of Mind 1

Financial health is a key part of complete wellness, so putting your estate in order is essential for true peace of mind. One often overlooked aspect of a balanced estate is appointing a trustee to take care of your affairs in case you ever need them to. Undoubtedly, when it comes to picking the right fiduciary/trustee, it’s important to get it right.

The Law Office of Raymond L. Stuehrmann is an experienced and dedicated firm with a focus on helping clients address all aspects of estate planning. With a reputation for thoroughness and providing practical solutions to avoid contention in estate administration, Ray Stuehrmann takes the time to ask in-depth questions and ensure he understands a client’s needs before recommending a course of action. Here he addresses some common questions about how to choose the right trustee for your estate.

Q. What is the role of a fiduciary/trustee?

A. The trustee is the person who administers the property when the trustor, who is the original owner, can no longer do so. Usually, we are talking about the “successor trustee,” who takes over when the trustor can no longer function as the initial trustee. I’ll use “trustee” to refer to the successor trustee. On the death of the trustor, the trustee takes possession of the assets, pays bills and taxes and ultimately distributes the assets according to the principal’s instructions as spelled out in the trust. If the trustee takes over during the trustor’s lifetime, the trustee steps up to the plate and administers the trustor’s financial affairs.

Q. What makes a good trustee?

A. Well, let’s start with that alternate word, “Fiduciary.” It’s based on the Latin word “fides,” which means “faith.” A trustee is someone you can place your faith, or trust, in, someone you can rely on to carry out your wishes faithfully and not bend to other people’s suggestions. You want them to carry out your intentions as expressed in the trust. For example, if you want to leave your jewelry to granddaughter Kate, the trustee does not have the discretion to give a piece to granddaughter Irene, even if Irene’s mother insists that Grandma always said Irene could have it.

The trustee should have some financial savvy so they won’t be overwhelmed by collecting assets, selling real property and maintaining appropriate bank records and ledgers to keep track of all transactions. The trustee should know when it’s time to ask for help, whether it’s with bookkeeping or professional help with legal or accounting issues. This is no time for winging it, especially when it comes to taxes.

Q. What are the main concerns?

A.  In addition to the qualities just mentioned, you should select a trustee who will be available at the time for him or her to take over. It’s best to nominate someone geographically close enough so that they can actively participate in going to the bank to collect accounts, for example. A local person can visually inspect real estate and assist in determining appropriate work to make a house easily marketable without overdoing it.

You should also consider the personal situation of your intended trustee. If they have a young family and a full work load, will they be able to devote the time necessary to administer your affairs? At the other end of the age spectrum, will they be healthy enough to take care of the estate affairs? Naming your parents might make sense when you’re young and they’re still middle-aged, but what about when they need more attention than your kids do?

In considering whether to appoint multiple trustees, please consider logistics. California law requires trustees to act together. If you have more than one, will they agree with each other, or will they become hopelessly deadlocked? Even if they agree, how quickly can they get together to act on anything?

Q. Isn’t it best to appoint a family member as a trustee?

A.  In many instances, this works. But analyze the situation carefully. If they are bickering now, they will bicker later. No matter what the trustee does, one of the beneficiaries objects. This occurs with blended families; a child by one parent is trustee and the children of the other parent fight every decision, but it can also happen in a single-marriage family where there is a history of ill-will between siblings.

If there is any question of a family feud in such a situation, the trustor could still appoint a relative who would be less contentious, such as a cousin of the beneficiaries, especially if the cousin has a financial background. Reciting in the trust that the trustor has selected Cousin Renee because of her CPA background makes the decision look less like a slap in the face to the trustor’s children.

Q. What type of legal paperwork must be filed to appoint a trustee?

A. The trustor selects the successor trustee in the trust itself. I strongly recommend nominating at least two successor trustees, in case the first for some reason fails to qualify.

In most cases, the trustor and usually the spouse are the initial trustees. When they no longer are serving, the successor trustee takes their place. The successor trustee will need a Certification of Trust to establish his or her authority. It’s a good thing to execute this along with the trust for continuity, instead of trying to create one at the last minute. If real estate is involved, an affidavit of death of trustee must be filed, as well as certain paperwork with the County Assessor.

Filing with the Superior Court is not necessary, unless none of the named successor trustees can serve. Avoiding court proceedings is one of the main, if not the main, reason for establishing a trust in California.

Q. What are some common mistakes when selecting a trustee?

A. The biggest mistake is appointing someone who is clueless about their responsibilities. This is the person who will look out for his or her own good first and will disregard the trust provisions, or interpret them in a twisted way to exclude other beneficiaries. The appellate decisions are full of instances of people who had no business being near a checkbook. It’s your money and your family; don’t get sweet-talked into letting a so-so relative manage your affairs!

Another mistake is to think that by making all of your children trustees, you’ll force them to get along. You’ll force them into a stalemate, and the Court will end up removing them all and appointing a third party.

For more information about selecting a trustee and estate planning, contact The Law Office of Raymond L. Stuehrmann at 805.230.1288.