If you have a lot of heirs, estate planning can be quite a touchy subject. Without a doubt, everyone wants a portion of your wealth at your passing. The things that happen in family drama movies can occur in real life, too. If one of your heirs receives the smallest portion of your wealth, and they believe that they deserve more, chaos can ensue.
Nobody wants to depart this life with their family in shambles. But even wealthy people on their deathbeds can’t have everything they want. So, does that mean dividing your assets equally among your heirs is the best way to avoid disputes?
Fortunately, it’s not. Meticulous estate planning is key to distributing your assets fairly. And of course, a will. Begrudging heirs will no have other choices but to accept what you left them if it’s what’s written in your will. But what’s if that’s not enough?
Some people appoint a trustee instead of writing a will when conducting estate planning. Some have both a will and a trustee. In this article, we’ll explain what a trustee is, and see if they’re right for you.
What is a Trustee?
A trustee is an individual or a firm that manages assets or properties for the benefit of a third party, a.k.a. beneficiaries. They’re not just appointed for estate planning purposes, but also for a trust fund, bankruptcy concerns, charity, or certain types of retirement plans or pensions.
Since they legally hold and administer your properties and assets, trustees are allowed to make decisions in your beneficiaries’ best interests. Such is called their fiduciary responsibility.
A person who appoints a trustee is called a trustor. As a trustor, you are giving the trustee the right to hold the legal title of your assets and properties for the sake of your beneficiaries. Like a will, a trustee also ensures that your wealth will be distributed fairly upon your death and that your last wishes will be granted.
The specific duties of a trustee are unique to your agreement and are influenced by the type of assets you let them hold. For example, if you own several real estate properties, your trustee will be in charge of overseeing those pieces of land. Despite their unique duties, though, all trustees have general responsibilities and follow general guidelines. They must keep all the assets under their control safe. If they hold investable assets, those will be considered productive for the benefit of the beneficiaries.
Trust vs. Will
A will is a written document stating a deceased’s persons wishes, from the guardianship of their minor children to the distribution of their assets and properties. Your will immediately becomes effective upon your death. A trust, on the other hand, becomes effective the day you create it.
In a will, you’ll write down a list of your assets, debts, heirlooms, the contents of a safe, cars, jewelry, and other properties. You’ll also write down the names of the people who should inherit those. However, despite a will’s clarity, there’s a catch: your estate will become part of the public record. This means that anything left by your will should go through the probate court, and probate attorneys are costly.
If you choose to create a trust, you can avoid the probate court. Your properties and assets can be distributed immediately upon your death. You can stop your heirs from fighting with a trust because the probate court allows heirs to sort out your estate, which could take months. You could lose 2% to 4% of your estate to an attorney’s fees and court costs.
A trust is just more expensive than creating a will, but if it can prevent family disputes upon your death, it’ll be worth it. If you have further wishes unrelated to your assets and properties, you can combine your trust with a will to ensure that they will be fulfilled.
Who’s Qualified to be a Trustee?
Most people choose a family member or a friend to be their trustee. There are also professional trustees, usually an accountant, a lawyer, or a trust company. When making your choice, consider your options’ trustworthiness more than your relationship with them. If your family members or friends are unskilled at financial management, you’re probably better off with a professional.
The biggest advantage of choosing a family member or a friend is, of course, they don’t charge. If they’re good at keeping assets and properties safe, but a novice in growing wealth, they can pair them up with an experienced investment consultant to help them maximize your assets’ value. That way, you can distribute greater wealth upon your passing.
You can also have more than one trustee, such as one family member and one professional. This is a good choice if you think that appointing a family member alone will breed resentment among your other heirs.
Whatever the decision you make, be very clear and exhibit fairness. Ensure that your trustee will fulfill your wishes and that they’d also respect your heirs.