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Friday, March 8, 2013

Estate Planning Independence

Fifth-grade girls basketball is more intense than most of my courtroom battles. In a recent game my daughter, the point guard for her team, got into foul trouble. One more foul and she would be gone.  Her team’s seemingly insurmountable lead of seven had dwindled to two points with about three minutes left in the game.  My daughter tried to make a steal, got the ball, and then was whistled for a reach-in foul (the moral – never trust a referee who looks older than Yoda and is wearing protective goggles to officiate a basketball game of 11 year-olds).   I felt powerless as she was shown her seat on the bench after fouling out.  She sat there with tears running down her face as the other team won and advanced to the championship. 

Any parent whose child participates in sporting events knows that once their kid is on the court the parent is no longer in control.  Watching my daughter learn through adversity on the basketball court without stepping in is difficult but necessary for her development as a player and person.  Giving up control may be a hard choice to make but undoubtedly is the right choice. 

As part of the estate planning process, families need to decide who will be in charge of taking care of their estate after they are gone.  If you are forming a trust this person is known as the successor trustee.  If you are forming a will this person is known as the personal representative.  For simplicity’s sake I will refer to such person as the trustee in this article.  Most people appoint another family member as the trustee.  Perhaps, this is because they want to keep control of the estate in the family or because they believe it is the privilege of their oldest child.   

While there are some benefits to appointing a family member as trustee, such as understanding family dynamics, there are disadvantages.  Most family member trustees are inexperienced with the legal and financial implications of dealing with a trust or estate.  Errors in judgment or mismanagement of trust property can leave a trustee personally liable to the other beneficiaries of the trust.  Inadvertent mistakes can lead to litigation and unnecessary stress.  Litigation will deplete the assets of the trust.  Other family members may perceive that the trustee is acting on his or her own behalf, leading to family strife and conflict that could last many years.  Being the trustee of a trust is a difficult job.

Fortunately, there are independent trustees such as financial institutions who are capable of acting as trustees.   A competent estate planning attorney can recommend a good independent trustee.   Good independent trustees are professionals who understand the process of being a trustee.  They know how and under what circumstances to make investments.  A good independent trustee is skilled at dealing with the legal process and beneficiaries who do not always see eye to eye.  Appointing an independent trustee gives the trust maker the best opportunity to make sure his or her intent is carried out in an impartial fashion.  Appointing an independent trustee removes the risk of a cherished family member getting sued when all he or she is trying to do is carry out the intent of the trust maker.

Just as I give up some control over my daughter every time I allow her to walk on the basketball court, families give up some control when they appoint independent trustees.  Giving up control may lead to tears and thoughts of “did she not trust me enough to appoint me as trustee?”  Just as my daughter will be better off from participating in sports, in most circumstances your family members will be better off not carrying the weight of a trustee’s obligations.  One of the main purposes of estate planning is to protect your family.  Appointing an independent trustee provides that protection and grants your family freedom from unnecessary strife.  If only there were a way to protect unsuspecting fifth-graders from goggle-wearing octogenarians. 

Jeff Brunson is an attorney and shareholder at Beard St. Clair Gaffney PA.  The opinions contained are his own and nothing written should be construed as legal advice.  Jeff's practice involves litigation, business disputes, and estate disputes.  He can be reached at his Rexburg office, 520 First American Circle, (208) 359-5883, jeff@beardstclair.com or follow him on Twitter @jeffbrunson.

Staff at 3:36 PM
Estate Planning
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