How to choose the right trustee for your family trust paid Whittier Trust
One way a family can handle the issues that arise when transferring significant wealth is a trust. A neutral, third-party corporate trustee can provide balance between family interests and asset protection.
In addition, placing shares of a family business into a trust means that the trustee, not the beneficiaries, holds the voting rights for them. If current beneficiaries were to hold them, they might vote in a way that is clouded by their own self-interest. The trustee, on the other hand, must vote the shares with all beneficiaries in mind — both current and future beneficiaries of the trust.
“We encountered a situation where a stepmom was named as trustee and invested all of the trust assets in bonds, which provided her with a lot of current income but didn’t provide any growth for the remainder beneficiaries,” said Frank. “She didn’t do it out of malice. She just didn’t know. But the remainder beneficiary sued her.”
“Maybe a couple of the kids live really close and they see the spouse a lot, while the other one lives across the country,” said Frank. “The child who's not close geographically might think that their siblings are influencing mom or dad.”It might not be your child, either.First, not every child is capable of, or even particularly interested in, managing trust assets, Frank said.
If a child is running a family business, Frank said, a better solution is to leave him or her to it — and name an independent trustee to run the trust itself.A trustee, Frank said, will essentially “be stepping into the shoes of the grantor.” The trustee therefore has to be someone “who knows the grantor or who has a clear understanding of what the grantor would want.”
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