Should I Name My Adult Child as Trustee?

imagesThis is a question that we get asked often.  And, it is one that requires careful consideration before making a final selection. Many people prefer to select an adult child as their trustee because, in most cases, they can depend on their child to make good decisions. Additionally, a child will generally have the best interest of the family in mind.

It is important to remember that sometimes choosing an adult child as a trustee comes with unique considerations. Perhaps you have several children – this will require you to choose between them (or choose co-trustees) and could cause hurt feelings amongst the ones not selected. One logical option is to choose the oldest child as trustee. However, if this child is not particularly responsible, it can also create a sticky situation with regard to the selection process.  Here are a few things to consider when determining if one or more of your children might be a good choice for trustee:

  1. Is your child responsible?  Have they made good decisions in the past? While we all have made mistakes in our youth, it is important to choose an adult trustee that appears to have learned from those mistakes and is able to make sound business decisions.
  2. Is your child organized? Being a trustee can require a lot of paperwork, phone calls and management. It is important to choose a child who will not lose important documents and is able to make timely decisions.
  3. Does your child have time?  Even the most organized and responsible adult child can be over taxed with their current responsibilities.  It is important to keep in mind that the job of trustee (especially as a “volunteer trustee”) can often be time-consuming.  Make sure that your child is able to take on this additional responsibility given their current commitments to their family, career and other obligations.
  4. Does your child get along with the rest of the family? While all siblings and family members can disagree from time-to-time, it is important to choose a child trustee who is not consistently at odds with other family members. If they cannot get along while you are alive and able to make decisions about your trust on your own, what makes you think they will be able to do so once they are in charge of your assets?
  5. Does your child live nearby? A trustee will be required to sign important documents in a timely manner and be able to access your accounts. Consider your child’s geographic location before making a final selection.
  6. Is your trust complicated?  Do you have a lot of assets? Do you own a considerable amount of real estate? Are your assets divided among a lot of beneficiaries? While your child might be very responsible and a good decision maker, if you have a complicated trust fund, this might not be a job for a layperson. Consider the complexities of your financial portfolio before you decide to pass on the responsibility of overseeing it to an untrained person.

With all of that in mind, we always recommend that our clients consider hiring a professional trustee (specifically if they answered “yes” to point number six above). Not only will this person have the financial expertise to understand and execute your final wishes, they also do not hold biases that a family member might. Additionally, if your children cannot agree, this person can serve as an arbitrator and help them make more informed decisions.

The bottom line in choosing a trustee is to look closely at your specific situation as well as those of your family members. Additionally, take some time to discuss your thoughts with your financial advisor (we always suggest fee-only) and an attorney to make sure you have considered all your options.

 

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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