Last week Advisor One discussed an estate planning issue that is underappreciated by some community members: the need for an educated trustee. Our New York estate planning attorneys commonly use trusts to help local residents avoid probate and save on estate taxes upon their death. When a trust is used a trustee has to be designated, which is an individual or entity that will carry out various responsibilities upon the death of the one who created the trust, the Grantor. The trustee is obligated to complete a range of legal and practical duties at that time. Without proper education and guidance they run the risk of failing in their obligations and causing a variety of problems for the family involved.
Upon the death of the Grantor, for example, the trustee must delve into the Grantor’s personal and financial situation. That includes creating a list of all of the individual’s assets, including personal property, real estate, stock, and other items. The fair market value of the property must be assessed so as to establish a new tax basis for possible future appreciation purposes. An assessment must be made to determine if estate taxes are at issue before equitable distribution of property to beneficiaries per the agreement’s terms. Many other duties must also be fulfilled. Outstanding debts have to be paid, life insurance claims filed, retirement accounts handled, tax returns filed, and other accounting documents properly crafted. While the settling of a trust is easier than the probate process, it still demands prudent action by those involved.
The complexities of the position make it necessary that trustees be educated about their role, and it makes it important for the Grantor to give careful thought to trustee selection. The article notes of participants at a recent trustee education seminar that “grantors were trying to determine which made most sense for them: a personal trustee, a corporate one, or a personal trust company.” The article went on to explain how it was often difficult for families to identify a personal trustee that possessed the technical skills and relationship with the Grantor needed to best fill the role.
These challenges are why our New York estate plan attorneys explain to residents that it may be prudent to chose a professional trustee, such as a trust company, bank, or lawyer. A clear benefit of a professional trustee is the expertise they bring to the position, guaranteeing that the actual settling of the trust will meet technical requirements. In this way, a Grantor can be sure that the trust will be properly managed and actually make the difficult time easier for the family. Some residents may feel comfortable with a mixture of both an individual trustee (like a relative) and a professional trustee (like a lawyer). In those cases, the two can both be named as co-trustees, often providing the balance of expertise and familial closeness that a Grantor prefers.
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