Weighing in on WHO will make decisions for you: Trustees

Trustees:  Consideration for selecting those who will make decisions for you.

A trust or power of attorneys or will are all documents that at their best do what you would do at a time when you’re not available.  The situations can be death or injury or disease.  We can plan for potential contingencies but what we can do best is to choose the right person for those unexpected, undocumented life events.  The trustee or agent is themselves subject to life so how will your choice make your decisions in the midst of their lives.

  1. The ultimate success of your trust’s mission will depend in large part on how your trustee carries out your intentions, making the selection of a trustee one of the most important elements of trust design.
  2. The ideal trustee should possess or have ready access to legal, tax, investment, and administrative expertise, as well as the wisdom to invoke that expertise when needed. The ideal trustee should also be able to deliver that expertise loyally, decisively, and impartially.
  3. Personal confidants, relatives, lawyers, accountants, and banks are all commonly used as trustees. Family members, friends, and business associates are often the most knowledgeable about your intentions and your beneficiaries’ needs, but may have less than optimal skills or temperament for the job. Professionals may offer a stronger skill set but can lack important personal connections to your family. Professionals may also be held to a higher standard of performance than lay trustees by probate judges and executors.

The considerations are many but zero in on a personal contact or a professional representative.  You can opt for a personal confidant or relative in whom you have strong faith, such as a business associate, sibling, or spouse. You can select a professional practitioner whose skills might be especially useful to your purposes, such as a lawyer, planner, or accountant. Or you can designate a bank or trust company to act as a corporate trustee. Each option presents a unique balance of benefits and concerns.The choices in each group are many and only you can make this final critical decision.  Think through scenarios of how your potential representative will handle decisions.

Ideally they will have a well-established relationship with your intended beneficiaries and a detailed knowledge of the unique circumstances in your bequest or life principles. That familiarity can provide the context needed to interpret your wishes in your absence most effectively. It can also lay the groundwork for a strong long-term relationship between the trustee and the beneficiaries. However, someone chosen solely on the strength of personal relationships and intimate knowledge may lack the training or skills needed to act impartially in the face of duress or emotional entanglement. What’s more, a friend or relative acting as a trustee might have a conflict of interest or be unable to devote sufficient time to the duties of trusteeship, and these potential deficiencies may not become readily apparent for some time.  The biggest obstacles is lack of organization and ability to delegate to a professional when needed.

A professional practitioner who has had significant involvement in your family’s affairs may offer many of the same advantages as a personal associate, such as personal relationships with beneficiaries and historical knowledge of unusual situations and special needs. They may also have the professional distance needed to remain dispassionate under difficult circumstances. However, like a lay trustee, an individual professional’s tenure may be subject to their own life and may ultimately be unavailable at some critical future juncture.

Edi Alvarez, CFP®




Introduction to Living Revocable Trust

Introduction to a Living (Revocable) Trust

(information summarized from the State Bar of California)

Living trust is a legal document that you use to control your assets during your life and that your trustee can use to direct your assets when you are incapacitated or at death.  Your assets (bank accounts, brokerage accounts) are put in the name of a trust (instead of your own) and administered by the trust.

You manage the trust during your life and your successor trustee (an institution or person) will direct it when you are unable or unwilling to do it yourself.  This type of trust is called a revocable living trust or revocable inter vivos trust or grantor trust.  Your trust can be amended or revoked while you are competent.

  • A living trust agreement gives the trustee the legal right to manage and control the assets held in your trust.
  • Instructs the trustee to manage the trust’s assets for your benefit during your lifetime
  • Names the beneficiaries (person and charitable organizations) who are to receive your trust’s assets when you die
  • Finally, it gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets – the trustee is a fiduciary.

What can a living trust do for me? It can allow someone of your selection to make financial decisions and act on your behalf if you’re unable to manage them yourself.  In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so.  You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself.  At death or if disabled your trustee like a will’s executor and would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions.  Unlike a will, this can only be done without court supervision or approval.

Should everyone have a living trust? No.

What are the disadvantages of a living trust?  No court supervision.
Cost of trust can be higher than creating a will.
Creates additional paperwork since lenders don’t usually lend to a trust and you may need to take it out of the trust (by deed) before you can take the loan on any real property.

If I have a living trust, do I still need a will? Yes.  Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship.

Will a living trust help reduce the estate taxes? No.

Will I have to file an income tax return for my living trust? During your lifetime the trust is identified by your social security number and all income and deductions related to the trust’s assets are reportable on your individual income tax returns.

How do you find an attorney to work with you?
Ask us for a referral or ask a trusted friend. You can also call the California State Bar – certified referral service.  www.calbar.ca.gov/lrs or 1-866-442-2529.  You may want one who is ‘certified specialist in estate planning, trust and probate law’ although some good estate attorneys do not have this certification.  You could also check a list at www.californiaspecialist.org and click Specialist Search. Some attorneys charge hourly and others have a fixed/flat fee.  Always be wary of insurance an annuity sales companies giving estate planning advice.  You may want the pamphlet “How Can I Find and Hire the Right Lawyer?” from the state bar: www.calbar.ca.gov

** The information provided is NOT legal advice it is only provided for informational purposes to guide you through this process **

Edi Alvarez, CFP®