Estate planning documents do more than direct where assets will eventually go. They also give people important jobs.
A trust may name a successor trustee. A will may name a personal representative. A durable power of attorney may authorize an adult child, relative, or trusted friend to make important financial decisions during incapacity.
Attorneys and financial professionals who create an estate plan know these roles. For the person named in the document, they may be anything but.
Consider that distinction before the responsibility becomes real.
Naming Someone Is Not the Same as Preparing Them
Successor trustees and other fiduciaries can eventually face significant responsibilities. They may need to oversee investments, evaluate distributions, maintain records, coordinate with attorneys and accountants, communicate with beneficiaries, and make decisions while adhering to legal documents they did not create.
Those responsibilities often arrive at a difficult time.
A successor trustee may assume the role following a parent’s death. An agent under a power of attorney may be called upon when someone they love becomes incapacitated. In either situation, the individual may be dealing with personal and family concerns while simultaneously being asked to understand unfamiliar financial and legal responsibilities.
That is a challenging time to begin learning.
Yet future fiduciaries are frequently absent from the conversations in which the estate plan is developed. They may know they have been named as a trustee or agent without knowing much about what the role actually requires, or why the plan was structured the way it was.
These conversations can also confirm whether the person you have named is comfortable taking on the responsibility. Family circumstances, health, location, and other obligations can change over time, so it can be worthwhile to revisit these decisions periodically.
Providing Context Before It Is Needed
Preparing someone does not necessarily require sharing every detail of an estate plan.
Clients may have good reasons for keeping account values, distribution provisions, or other information private. Preparation can be tailored accordingly.
Even a relatively simple conversation can provide valuable context.
What does a trustee do? What kinds of decisions might require discretion? What does fiduciary responsibility mean? Who are the family’s attorney, accountant, and financial advisor? How are those professionals expected to work together? Where should the individual begin if circumstances suddenly require action?
For a trust, the discussion might also cover distribution standards, the distinction between income and principal, investment oversight, or responsibilities to multiple beneficiaries.
The objective is not to turn a future trustee into an estate planning attorney or investment professional. It simply makes the role less unfamiliar.
A practical first step may be to arrange a conversation with the person you have named, explain why you selected them, and make sure they know which professionals to contact if they are ever called upon to serve.
A financial advisor can also help future fiduciaries understand the family’s investment accounts and financial picture and coordinate with the estate planning attorney and tax professionals when appropriate.
Preparing People, Not Just Documents
A carefully constructed estate plan can establish responsibilities, authority, and instructions. But ultimately, people must carry out those instructions.
Giving future fiduciaries some familiarity with their roles, and with the professionals who can help them, can make the transition considerably more manageable when the time comes.
At Howland and Associates, we believe an important part of multigenerational planning is considering not only whether the appropriate documents are in place, but also whether the people named in those documents are prepared for the responsibilities they may someday assume.
A good estate plan identifies who should act.
A well-prepared family helps them understand how.
If you are reviewing your estate plan or thinking about how to prepare the next generation for future financial responsibilities, Howland and Associates can help you consider how your investment and financial planning fit into the broader conversation.
FAQs
What should I tell the successor trustee of my trust?
A successor trustee should have a general understanding of the role and the responsibilities they may eventually assume. Consider discussing the types of decisions they may need to make, how distributions are handled, and where important documents are located. They should also know how to contact the attorney, accountant, financial advisor, and other professionals who can help them carry out their responsibilities.
Should I tell someone they are named in my will or estate plan?
In many cases, it can be helpful to let someone know that they have been named to serve in an important role. This gives them an opportunity to understand what may be expected of them and determine whether they are comfortable accepting the responsibility. You do not necessarily need to share every financial detail or provision of your estate plan in order to prepare them for their potential role.
What should a successor trustee know before taking over?
A successor trustee should understand the basic responsibilities of administering the trust, including following the trust’s instructions, maintaining appropriate records, overseeing trust assets, communicating with beneficiaries, and coordinating with legal, tax, and financial professionals when needed. Depending on the trust, they may also need to understand distribution standards and their responsibilities to multiple beneficiaries.
How often should I review the people named in my estate plan?
It is a good idea to review the people named in your estate plan periodically and whenever there is a significant change in your family, finances, or personal circumstances. Consider whether the individuals you selected are still willing and able to serve and whether they remain appropriate for the responsibilities involved. Your estate planning attorney can help determine whether any changes to your documents are appropriate.