Some people have assets that they will need to have managed after their death because they do not want to leave their estate in one sum to beneficiaries. There are several reasons for this—the beneficiaries may not have "money maturity" and money left in trust is protected from creditors, bankruptcy, and divorce claims.
For most individuals, selecting a corporate trustee to handle the funds is a personal and important decision. After all, you're legally agreeing to allow your trustee to hold and manage the trust's assets on behalf of your heirs. So, most likely you'll pick an institution that you have dealt with in the past and believe will best serve your descendents. But, what happens if the trustee's management changes or their investment philosophy no longer matches your beneficiaries' needs?
Estate planning attorneys constantly advise their clients to have a succession plan for their individual trustees. However, often a plan to allow for future corporate trustees is ignored.
Merger Mania
Look at the number of bank consolidations that you've seen over the past five years. Will the friendly trust officer at the corner independent bank still be there when your family has a financial emergency or needs more income from your trust? Or, will the bank be gobbled up by a giant financial institution forcing your loved ones to deal with an arrogant clerk 2,000 miles away?
Investment Strategy Conflicts
What if you fund the trust with stock of your closely held, family business that you want kept for future beneficiaries? Then, after your death, the trustee decides that trust's portfolio should be more diversified, even though that is against your and your beneficiaries' wishes. Will your beneficiaries be able to get rid of the trustee without getting into a costly legal battle?
Give Your Beneficiaries Keys to The Handcuffs
You can build flexibility within your trust to prevent such scenarios as shown above. Include provisions for dismissing a trustee. Make sure your trust contract specifies how and under what circumstances the trustee can be fired and the assets put with another institution. You don't want your beneficiaries to have to deal with these issues after you're gone, because by then it's too late.
You may want to name a family member as a trustee, whose only job will be to choose a corporate trustee after you die. Or, you could name a neutral party, such as an attorney, financial advisor, or accountant to pick a trustee. This same individual could also have the power to remove and select a new trustee if needed.
For the names of several local, estate planning attorneys who are aware of these issues, return the enclosed coupon.