Sunday, September 23, 2012
Who can you Trust?
Once you have decide to create a trust,a legal document that leaves property and other assets to your heirs, you then must decide who will be administrating this trust after you pass. This person will be acting in a fiduciary capacity and be responsible for running the trust and making the distributions. People choose between a family member, close friend, law firm or another such professional. Several factors should be weighed in determining who to choose. 1) What is the size and complexity of the Trust? Professional services can be expensive. Professionals typically get paid based on the percentage of assets they have to manage and sometimes charge a minimum fee, which can make their services costly for more modest estates. This cost might be worth it if your trust is meant to last generations. Because an entity like a bank is likely to outlive a friend or family member who would otherwise do the job. Also, if your trust is complex, unless your family member or friend has a high degree of knowledge, administration will take many more hours and considerable frustration. Even if the trustee is a beneficiary, this isn't the type of gift you would want to leave him or her. 2) What is the knowledge base of the family member you would choose? As stated earlier, trusts can be a complex matter. Make sure the person you tap for the job is up to the task. Trust administration can be a heavy workload, including routine administrative duties, investment-diversification decisions, tax filings and the distribution of assets to beneficiaries. If your trustee doesn't have thee time and skills for the job, he or she can hire professionals to assist with certain facets of this workload—say, property management or investment strategy—but it still takes a certain amount of knowledge to assemble and manage a good team. 3)What is the relationship between the beneficiaries? If your family does not get along or has a complicated relationship, then placing one person as a trustee will place additional strain on that person as well as increase their workload. Think of hiring a professional instead of a family member who might go against their final wishes. For instance, it may be a bad idea to put a spouse who has a hard time saying no to a child in charge of a trust you would like to see paid out over a long time period. *This article was inspired by The Wall Street Journal article of September 10, 2012 " A Matter of Trust" by JEANINE SKOWRONSKI