Estate Planning Mistakes

Estate Planning Mistakes

- Today we're gonna talk about five mistakes made by successor trustees and how you can avoid them. Hi guys welcome to Two Minute Tuesday where I attempt to discuss an estate planning topic in two minutes or less.

Now I will tell you today it won't be under two minutes. We've got a lot to cover. Now before we get started if you are enjoying these videos every Tuesday can you please do me a huge favor and hit the Subscribe button in the right-hand corner below and click on the bell to get alerts when we post new videos every Tuesday. I'd really appreciate it. When you create a revocable living trust, one of the first things you need to think about seriously is who is going to be your successor trustee both during your lifetime and after you pass away.

The person you pick should be somebody that you trust implicitly and it should be somebody who you believe can remain steadfast to your wishes in the face of family disagreements and disputes regarding the trust if they were to come up. So here are five surprisingly common mistakes that successor trustees make.

The first is faulty record keeping. If the trustee hasn't been able to keep accurate and detailed records of income and all distributions and your trustee also needs to be prepared to report these figures to beneficiaries on a regular basis. If the records are not complete or they are not as accurate as they should be then this can open the door for a lawsuit. 

So to prevent this a trustee should hire an accountant to assist them in the record-keeping and the bookkeeping to make sure everything is aboveboard.

The second mistake is misunderstanding the fiduciary role. So a lot of trustees mistakenly assume that their job involves acting in the best interests of the person who created the trust. But the reality is that their job is to act in the best interest of the beneficiary. Now the person who created the trust could also be the beneficiary as well. And I think that is why sometimes a trustee will get confused because they have the beneficiary who created the trust and then they also have the beneficiaries who could receive from the trust once the original grantor has passed away. So to avoid this mistake it's important to detail what the fiduciary role of the successor trustee is in the trust document itself and make certain that the trustee understands their role as a trustee.

The third mistake that trustees make is not working effectively with other team members that you've already put together for your estate. A trustee's failure to communicate with key members of your team like your CPA, your financial planner, and your attorney can lead to misunderstandings and significant preventable financial losses. So to prevent this mistake, make sure that whoever your successor trustee is has been introduced to your CPA, your attorney, and your financial advisor and anybody else that is involved on your estate planning team.

The fourth mistake is failing to discuss compensation. You know, a lot of times when it comes to naming a family member as a successor trustee, people will not put in any provisions for compensating that person to act as their trustee. Now in most cases, it is probably not going to be a problem. But if there's significant work for them to do, then it can sometimes result in a lack of moral or even resentment for them to having to manage this entire estate. So to prevent this, you should discuss compensation with whoever you're thinking about and put it in writing in the terms of the trust document itself. 

The fifth mistake is failing to remain objective. So like I said earlier, a lot of people will pick a close family member as their trustee. But the problem can be that disputes about money always change people, believe me. I've been doing this for over 18 years and people come in all the time and say, my family won't fight over it. But when it comes to money, they almost always do and the end result can be decisions that family members perceive to be unfair or that wind up being inconsistent with your intentions and creating family drama that is completely unnecessary. So to fix this, make sure the person who you have chosen can remain completely neutral and faithful to the terms of the trust even under the stress of other family members.

Sometimes the best solution is to just hire a third party to be a corporate successor trustee. It might cost a little bit of money, but it'll be worth it. So the bottom line is to remember that selecting who is going to be your successor trustee is one of the most important decisions that you will make during your estate planning process. So please give that a lot of thought.

Well, that's all for today. If you've not been able to make it to one of our live estate planning seminars and you still have questions, then please sign up below for our free estate planning webinars where you can watch from the comfort of your own home. Now I know today I was way over the two minutes, but this is important stuff. And if you enjoyed this video, then please like it below and please hit the Subscribe button or click on my face in the circle that should be appearing about now so you'll get our new videos every Tuesday. We appreciate you watching and I'll see you next time. Thanks again.

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