Serving as Trustee vs Being a Beneficiary

When you deal with your estate plan once every decade or so, it’s easy to get lost in the vocabulary.  This occurred to me the other day during a conversation with my client, Babs, who was upset that one of her daughters, Jeanette, was not listed in her documents as a successor trustee if Babs became incapacitated or died.

I was befuddled since Babs once told me how irresponsible Jeanette was. In fact, Babs said that she didn’t want Jeanette to have any control over her bank or brokerage accounts. So I first confirmed with Babs that we were talking about the same person.

“Well, yes” client answered, “I don’t want Jeanette to control any of my money, at least while I’m alive.”

“So why are you upset that she is not going to serve as your trustee?” I asked.

“Because I still want to treat all my children equally!”

This is where I explain that being a trustee is not an honor, nor does it bestow any more of a beneficial interest on the person acting as trustee. Instead, acting as a trustee is a job. It is laden with a lot of responsibility.

Whomever serves as your successor trustee must have the ability to interact with your financial advisor to determine what your asset mix should consist of. In fact, your trustee is held to the “prudent investor” standard under Florida law.  Violating that standard could lead to a lawsuit where the other beneficiaries of the trust recover damages against the trustee.

If stocks or bonds need to be sold in order to have cash to pay for in-home nursing care or other convalescent care expenses, your trustee is the one who makes decisions which assets should be sold to do that. If you need to move out of your home for care, then the family member that you have named as your trustee will have to decide whether to continue to have your finances continue to carry the expenses associated with owning the home or whether it would be prudent to sell it.

These are not easy decisions.

Your trustee will file your tax returns. He or she will interact with your CPA as well as your attorney when deciding legal matters associated with your estate. When you die, your trustee will have a fiduciary duty to your creditors, taxing authorities and the other beneficiaries. If your trustee violates these fiduciary duties then he or she can be held liable, and have to pay an attorney out of their own pocket to defend the claims or to satisfy any judgments if they are deemed to have acted negligently.

Just because someone is a trustee does not mean that the amount that they are entitled to as a beneficiary will change. If Suzy is a 25% beneficiary of the estate, she does not receive any additional beneficial interest when acting as the trustee.

She may get reimbursed for her out of pocket expenses associated with fulfilling her trustee duties, such as air fare, car rental, hotel expenses, overnight express charges and the like. She will also be entitled to take a trustee’s fee for her time. The fee that she takes is usually well earned, and is taxed as ordinary income much like a CPA’s or attorney’s fees would be taxed to them as ordinary income.

Many family members graciously perform their duties without taking a fee. More often than not, his or her siblings will not appreciate it and expect the child you have selected to act as trustee to do it all for free even though the duties can be enormously burdensome.

It is therefore vitally important when naming a trustee that you select someone who will devote the requisite time and attention to these important matters, and will be comfortable interacting with your professionals. Someone who is confident, diligent and detail oriented makes for a fine trustee. They don’t necessarily have to have any background in law, accounting or taxes. So long as they know how to interact with your team of professionals, it usually works out fine.

As you can see, it really isn’t a matter of being “fair” to one child or another. I would go so far as to say that not only have you not bestowed an “honor” upon the family member that you select as your trustee, rather you have handed them a job. A big job, at that.

So don’t worry about being equal. Select the family member who is the most likely to do the job right.

For more information on the duties of a successor trustee, visit for a free guide!

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Top 5 Reasons Baby Boomers MUST Update Their Estate Plans

The baby boomer generation, said to span between 1946 and 1964 has been quite the generation.  I know as I was born at the tail end in 1964. And boy have we been a royal pain-in-the-rear. By first swelling the ranks of classrooms, causing the construction of new schools, and then making college admissions hyper-competitive, afterwards increasing the demand for first home purchases and so on.

We’re even responsible for our own baby-boomlet of progeny in the 1980s and 1990s.

The oldest baby boomers are retiring – while quite a few remain in the primes of our working careers. We’re expected to put a strain on the Social Security and Medicare programs, and many of us haven’t saved enough for retirement. There are a number of reasons for that, from overconsumption to stock market and housing crashes to believing the mirage of never-ending youth.

A lot of us are very guilty of that last one.

The mirage of never-ending youth. It’s what traps those who haven’t looked at their estate plan in quite some time. When baby boomers arrive at my office, they generally pull out existing wills that call for guardianships for their children (who are now grown adults themselves) and name long-deceased parents as executors and trustees.

Which brings me to today’s topic – the top five reasons that baby boomers MUST update their estate plans:

  1. Relationships Change

Just as I mentioned above, your old wills, trusts and power of attorney documents might name people to serve in posts such as personal representative, trustee and health care surrogate who you may have lost touch with or who are no longer close to us. While attorneys in northern jurisdictions often name themselves as trustee of their clients’ trusts, you may now be a Florida resident or that attorney may have long since retired. It’s time to take a fresh look at who you have named to conduct your affairs for you in the event of your disability or death. Also, we may now be in a different relationship or marriage than we found ourselves in when we first prepared our estate plan. Blended families typical of second marriages require a thoughtful, detailed plan to prevent problems between a surviving spouse and step-relations;

  1. Children Grow Up

Your will drawn twenty years or more ago may have contemplated making distributions for your young children that are now fully grown with kids of their own. Your adult children may also be some of the best candidates to serve as your personal representative under your will or as your trustee under your trust. You may also want to protect the inheritance you leave your grown children from adult issues such as divorce or lawsuits;

  1. Your Health

While none of us like to admit it, age usually presents more health issues to deal with. You want to make sure that your health care surrogate documents are up to date, as well as your living will that designates what you want to have happen should you end up on life support with no hope of recovery. None of us wants to be the next Terri Schiavo, so it is important that your health care documents are up to date with today’s law and with your intent;

  1. Your Stuff

It’s probably time to review your assets and how your estate plan provides for you, in the event of your disability, and your loved ones after your death. In our youth our main assets probably consisted of a home, term life insurance and maybe a few investments. As we enter middle-age we may no longer have term life insurance (instead we may have whole or universal life policies that contain cash value), and we may have larger investment accounts as well as IRA and 401(k) accounts. As the types and amounts of assets that we own changes, it is important that our estate plan change with them. An estate plan built around a young family with term life insurance should look drastically different than an estate plan for someone in the prime of their working career or who is nearing retirement;

  1. Your Legacy

Finally, many of us like to consider what kind of legacy we leave behind. It might include a charitable legacy with institutions or causes near and dear to our hearts, or it might mean how we want our progeny to carry on with the wealth that we’ve accumulated.  Perhaps we’re concerned that we’ll take away the incentive to lead a productive life, or we may want our wealth to be used for certain activities we find beneficial – such as education or health care.

There’s a lot to consider. Make it a priority to dust off the will or trust that you’ve neglected for so long and use these five points to write down what concerns you the most about your own planning. Then take that to your attorney to provide a framework for your discussions and plans.

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

Another Look At Euthanasia

Euthanasia or physician-assisted suicide remains a topic of conversation, particularly among families of those who suffer from dreaded, life-ending diseases, especially those that take a long time to conclude such as Alzheimer’s, ALS, MD and terminal, inoperable cancer.

Some of my clients have voiced frustration that the law allows one to put down a pet in grave distress, but a human must suffer until the end. If you’ve ever witnessed a loved one die a slow, painful, death then you probably understand the desire to more freely allow euthanasia.

To that end, Switzerland, Holland and Belgium, as well as a growing number of U.S. states, including California, Colorado and most recently Maine, whose governor recently signed the Death With Dignity Act, have legalized euthanasia.

New medical guidance in Canada, where the practice has been legal for three years for terminally ill patients, hints at the troublesome ways that assisted suicide might be expanded in the coming years. I say “troublesome” because of the influence of the need for organ donations taken from individuals who choose to meet their end in this manner.

About 30 euthanasia patients in Canada have donated their organs after death since 2016. The Canadian Medical Association issued guidelines for how the process should work, clarifying that organ removal should not begin until the patient is medically deceased and the heart stops beating.

But some experts quarrel with this restriction.

In a 2018 New England Journal of Medicine article, two Canadian medical researchers and a Harvard bioethicist argued waiting until death occurs reduces the quality of donated organs. The authors suggest killing the patient by removing his organs. After all, the best organs come from live people, like those who donate a kidney.

Even a gap of a few minutes that it takes following death to remove the organ makes a difference in its quality. The New England Journal of Medicine authors admit to the ghoulishness of their proposal but note “many may want the option of donating as many organs as possible in the best condition possible.”

By linking assisted suicide and organ harvesting, those in the medical community ratify the premise that euthanasia can help create a more efficient organ supply chain. An obvious criticism of Canada’s guidance that organs may be harvested only from deceased individuals is that it focuses on the supply of organs while ignoring the demand.

One need only look to China to see where this might lead. There, organs are harvested from executed political prisoners. Executions are timed to maximize the organ-harvesting potential. After the sentence is handed down, doctors examine the condemned man to evaluate him as a possible organ donor. If he looks like a good candidate, the date of his execution is put on hold until, say, someone needs a heart transplant.

While you might say that China is the exception, it’s not too hard to imagine the temptation for other countries to link the time of death with the demand for organs. You may recall these conversations over the implementation of Obamacare, where critics suggested that “death squads” might take the need for organ donation into consideration when determining resources allocated to a terminally ill patient.

One lesson from Holland’s experience with euthanasia is that doctors and nurses may powerfully influence a person’s decision to end his life. The most vulnerable patients are those who are depressed and dependent upon another’s care. Some patients were reportedly influenced by their caregiver’s cues of being physically, mentally and financially worn out.

In many circumstances, slippery-slope scenarios and arguments often seem foolish or unlikely. Here, however, the moral problems warrant serious philosophical discussion. There are two very real sides to the euthanasia coin, and hopefully we arrive at conclusions considering the consequences of each.

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.