Historically, your institutional trustee may have been your small town bank manager who had worked in the same bank for many years and had a long-term personal relationship with you. The banking industry has evolved. Today, it’s exceptional to have that type of personal relationship with your banker.
Although a lack of relationship can help the trustee remain objective, the loss of a personal relationship may also affect your estate. Although each of a succession of professional managers may do a perfectly competent job, one may miss a pattern that may be obvious to a trustee who has managed your trust from its inception.
A story that may not be true, but is illustrative of the problem, involves a wealthy woman who created a pet trust for the benefit of her dog. The trust provided for the woman’s housekeeper to remain in her home and to draw a considerable salary to care for the home and dog for the duration of the dog’s life. She hired an institutional trustee to manage the trust.
A succession of employees of the trust company made dutiful inspections of the house at least once each year and confirmed that the dog was still alive. More than a decade later, when the dog would have been more than 20 years old, a newly assigned employee recognized that something was amiss. An investigation revealed that the dog had died. The housekeeper had purchased look-alike dogs and was on her third dog when her trickery was detected.
Institutional trustees are readily able to consult other professionals. While your individual trustee may struggle to find a lawyer or accountant who can give her advice on a minor problem, your institutional trustee can easily obtain advise from lawyers, accountants, investment professionals, and other experts. Also, even with staff turnover, the institutional trustee’s experience with trusts avoids the learning curve of an individual trustee who has little or no prior experience managing a trust.
Issues of self-dealing may arise with institutional trustees. The trustee may be inclined to invest the trust’s assets through the institution. You may want to mandate that part or all of the trust’s assets be invested through other institutions so that the trustee will make the most
suitable investments instead of favoring his employer’s investment vehicles. For smaller trusts, some institutions will restrict investment options. Be aware of your institutional trustee’s practices before you choose it.
Chapter 3
Providing for Your Children and Dependents
IN THIS CHAPTER
Choosing somebody to care for your minor children Safeguarding your child’s inheritance
Providing for your child’s continuing financial needs
Providing for children is often the first concern of somebody creating an estate plan. Young children will need somebody to care for them and to manage their assets. An estate plan can also help adult children by providing for college or for supporting children with disabilities.
Choosing a Guardian
As the parent of minor children, you are undoubtedly concerned about who will take care of your children in the event of your death. In most cases, a surviving parent can provide care, but these issues can be particularly pressing for single parents.
If a surviving parent can’t provide care for your children, a court will appoint somebody to care for them. Although your choice of custodian, or personal guardian, for your minor children is subject to court approval, in most cases, a court will defer to your wishes. To best protect your children, you should select a primary custodian and an alternate custodian, somebody who will care for your children if the primary custodian becomes unable or unwilling to serve.
In some cases, you and your spouse may disagree on who should be the children’s custodian. You should strive to reach agreement, even if your choice is less than perfect, because otherwise a court will make the decision for you.
Making the decision
Most of the time, parents want to keep their children together and will choose a custodian who is willing to care for all their children. In some situations, such as where your children have a large difference in age, you may want to designate more than one custodian based on the individual needs of your children. For example, you may provide for a teenager to remain with a nearby family through the end of high school, while a grandparent cares for your younger children.
Questions to consider in choosing a custodian include
How old is the custodian? Your designated custodian should be a legal adult under the laws of your state. In most cases, that’s the age of 18, but in a few states, the age of majority is 21.
How qualified is your custodian? Does your choice have good parenting skills and an appropriate personality and temperament? Can he provide a stable household environment?
Does your custodian have any physical limitations? Caring for children, and particularly for young children, can be physically taxing.
Does your custodian have other priorities? Will your choice have the time to care for your children, even if doing so affects his work life, social life, or lifestyle?
Does your custodian have other children? If so, how old are they, and how well would your children blend into the household?
Does your custodian share your moral and religious beliefs? Will he continue to raise your child in your faith or in a manner consistent with your morals?
Can your custodian afford to take care of your children? If your estate is not sufficient to provide for the financial needs of your children, will your choice be able to make up the difference?
You should discuss these issues with possible custodians and interview them prior to making your choice. This is a major decision, and it should be an informed decision. You may also choose to draft a letter to the custodian, to be kept with your will, which will remind them of your wishes for your children’s care. Although the letter will not likely have any legal effect, it will remind the custodian of your wishes and may help ensure that they’re followed.