Everyone who has a revocable living trust has named a trustee of their trust. Typically you name yourself – which means that you have total control over all of the trust assets. Your trust will also name someone or some institution to administer it when you die – and ultimately make distribution of the trust assets to your loved ones named in the document.

 But what happens if you get sick and are unable to manage your own affairs? If a certificate of deposit comes due and needs to be rolled over – who is going to make that decision for you? Who decides how much of your trust assets should be budgeted for long term care – and whether your assets can support in home nursing care? Who’s going to make decisions regarding the sale of a property? Continuing lifetime gifts to support a child or grandchild?

 All of these issues and more are addressed by your successor trustee. The trustee who acts in the event of your disability can be the same person or can be different than the trustee who administers your estate when you die. If you have different types of assets – a family business, for example – you might want to name a person as a separate trustee to run that in the event you are not able to but you are still alive.

 Let’s say that you’ve named a bank or trust company to manage your investment assets. Those types of financial institutions are well equipped to decide what investments you should have and how to maximize the income that you will need for your care. Those same financial institutions, however, do not generally prefer to manage real estate investments or small businesses. There’s nothing that prohibits you from naming different parties to manage the different types of assets that you may own.

 Carefully consider the family members that you name to act for you in the event of your disability. Many prefer to name their spouse. But if your spouse has never managed assets before, or is failing physically or mentally her(him)self, then you might want to add a supporting co-trustee to act with your spouse, or consider bypassing your spouse altogether.

 I’ve had several conversations with my clients about naming their children as a successor trustee or as a co-trustee. Often they’ll want to name the eldest child, simply because he or she is the eldest, even if another child might be more adept at handling things. “I don’t want to offend my eldest child,” the refrain might go.

 Here I advise caution. Too much can go wrong if your legal and financial affairs aren’t properly attended to. Consider naming the most responsible person for the job of successor trustee. And make no bones about it, acting as a successor trustee is a job. It is not an honor. It is rife with responsibilities and deadlines.

 Finally, you should have a conversation with those that you have named as your successor trustee. Don’t let them find out about it when the time actually arrives. They should be prepared to act, and should know basics – such as where you keep your financial statements and legal documents. They should know who your CPA is, who your lawyer is, who your financial advisor is.

 In the best of all worlds they’ve actually met your advisors, and had a chance to talk to them, even if that talk is five minutes. Don’t risk having a “transition in a time of crisis”. The better prepared and knowledgeable those who you’ve named to fill important roles are, the easier it will be for everyone.

 Including you. 

 ©2010 Craig R. Hersch