So, you are thinking about creating a trust and estate plan for the purpose of avoiding a probate. You have probably heard a lot about living trusts, revocable trusts, and irrevocable trusts, and are possibly confused as to what are the differences.
Firstly, living trusts and revocable trusts are basically the same thing, with a different name. Like the name says on a “revocable trust,” the trust may be revoked. On the other hand, a trust that says “irrevocable” is just the opposite. It cannot be revoked, except in certain circumstances that we will not go into in this blog.
So, the next question is, who should be my trustee?
Many parents name their children, sometimes the oldest child, or sometimes they want to name all of their children as trustees of the trust. I highly advise against naming multiple trustees. While I understand that parents want to treat each child equally, in real life experience of trust administration, it is difficult in cases when you have multiple trustees that may not agree with each other to make decisions regarding the administration of the trust and the distribution of assets. I consult with clients and advise that it is better to have one person in charge.
I also remind clients that if they do not feel their children are capable of managing the trust or capable of getting along with each other, then perhaps the client should consider appointing a third party as trustee. The downside of appointing a third party, such as an accountant, a CPA, a bank, if the estate is large enough, or any other professional trustee, is the cost. Professional fiduciaries are going to charge a fee for administering the trust. The fees depend on the type of assets, the amount of assets and what is involved by the trustee in administering the trust.
Furthermore, whoever is appointed the trustee must be trustworthy. You surely are not going to appoint a convicted felon who just got released from prison for grand theft to be the trustee of your trust. In practice, sometimes the choosing of a trustee is as emotional as who you would choose as a guardian to take care of your minor children if the need arose.
Choosing the right trustee is a very important part of your trust and estate plan.
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