BFP Choosing the Right Trustees
Choosing your executors or trustees – making the right decision!
For most people, choosing someone to administer their estate on death or a trust that may be set up particularly as a result of their Will is an easy decision. Frequently, family members or friends will be chosen because of their personal connection to the subject in question, their perceived experience in these matters and their pragmatic approach to life. In addition, if a partner is around, they normally all “get on”.
The conversation may arise over a cup of tea, a Sunday lunch or even as a throw away comment. In my experience, the decision is made by both parties with little thought to the matter in hand. After all, it’s not going to happen for ages is it?
I have found the reality to be very different. The person responsible for administering your finances either on death or in the event of mental incapacity will bear a huge burden that is unlikely to have been previously considered.
Family members, who previously got on, suddenly find they have conflicting interests as some will be beneficiaries of the estate or trust and others may not. It is not uncommon for the green-eyed monster to raise its ugly head in these circumstances.
More importantly, and particularly where trusts are concerned, the trustees may not have previously been aware of the amount of money for which they are now responsible and the legal requirements that may be placed upon them.
One case that I regularly use as an example is that of a couple in their late 40s who were preparing their Wills and trusts and had asked for friends to act as both their executors and the trustees for a trust which was to be created in the event of death together with the surviving spouse. This seemed fine in theory apart from the fact that the husband died suddenly shortly after preparing the Wills and he left a sizeable estate. The issue here was that neither of the friends had any idea of the size of estate they were required to administer and oversee and they were overwhelmed at the job in hand. In addition, the widow found that a large part of her “family” wealth was suddenly managed by friends as a result of the trust arrangement and it seemed that she now had to ask permission for access to her own money causing disharmony! Subsequently, and sadly, she felt that not only had she lost her husband very suddenly but she also lost her dear friends at a time when she most needed them most due to a change in the dynamics.
Another key factor to consider is whether the trustees you choose can work together. Again from personal experience, it can be very difficult where trustees are selected perhaps by different people and who, for whatever reason, find it very difficult to agree on the objectives and management of the trust. A typical example of this would be where a trust was set up as a result of a divorce and the trustees chosen were acquaintances of either party – whilst in principle, in agreeing to the role they should remain impartial, in practice the result could be quite different with allegiances to “either side” muddying the waters!
The key to a harmonious outcome, in my opinion, is to use a balance of family/friends and professionals. Many people considering their estate planning will still feel happier using family members particularly those who are used to dealing with affairs of this type. It is, however, very helpful to also appoint a professional trustee, usually a lawyer, to act alongside the other executors/trustees in order to bring an impartial element to the arrangements. This can often provide useful, professional advice in respect of probate or tax planning matter… and they can act as a referee if problems then ensue!
At Broadway Financial Planning we are passionate about planning for peace of mind. If you’re concerned about your own estate planning then please do not hesitate to get in touch.