If you are fortunate enough to have a sizable estate to pass down to future generations you are likely aware of how important it is to create a comprehensive estate plan that will facilitate the transfer of your family wealth in the most efficient and cost-conscious manner possible. Within your estate plan you may plan to incorporate a family wealth trust, or FWT. If so, you will likely appoint yourself to be the trustee of the FWT; however, you may be wondering “Who should be designated as successor trustee of a family wealth trust?”
A family wealth trust is an estate planning tool that allows you to transfer wealth to your children, grandchildren, and successive generations. Among the many benefits to using a FWT to pass down assets is that it allows you to retain control over the assets while you are alive and even retain a certain degree of control long after your death through the trust terms that you create. Because a FWT is a living trust it will become effective as soon as the formalities of creation are met and you have properly funded the trust. As the head of the family, you will undoubtedly appoint yourself to be the trustee of the trust. This allows you to continue to manage the trust assets so that they continue to grow while you are alive.
As is the case with any trust, however, you must plan for the possibility of the trustee’s death or incapacity – in this case your own death or incapacity. This requires you to appoint a successor trustee. The successor trustee will have all the same duties and responsibilities that you have as trustee. Therefore, you want to appoint someone who has the financial and legal acumen necessary for the job. Typically, a spouse or adult child is named as the successor trustee of a family wealth trust. Ultimately, your successor trustee should be the person, or entity, that you wish to take over management of the trust assets after you are gone. If you believe that an adult child is capable of managing the trust and acting as trustee you may wish to appoint your child. Sometimes, children have yet to reach the age and/or maturity needed to act as trustee. Although a spouse may be a good short term option, your spouse will eventually need to be replaced as well. Therefore, you may wish to consider appointing a professional or corporate trustee as your successor trustee to ensure that the trust assets are well protected for years to come.
Be sure to discuss your trustee options with your Texas estate planning attorney before making a decision.
Stephen A. Mendel, Estate Planning Attorney
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