Life can change in an instant. I was only 22 years old when my mother passed away from cancer. My parents had divorced eight years earlier, so she had named me—her eldest daughter—as trustee and executrix of her estate. I was a full time law student at the time, but had no practical knowledge about real estate, investments or any other type of asset. Nor did I have connections with experts in these areas who could help me. My mother’s death thrust an unexpected responsibility upon me at a time when I was grieving an unimaginable loss.
To make things more challenging, my mother’s instructions regarding our inheritance bred conflict between me and my only sister. She left everything to each of us in equal shares. However, I received my inheritance outright while my sister, who was only 18, received her inheritance in trust until she turned 21 years old. In other words: for three years, I held the purse strings to my sister’s inheritance and she was forced to come to me to request trust payouts.
My sister and I rarely saw eye-to-eye back then. The fact that our mom had designated me as trustee of my sister’s inheritance fed a perception of unequal treatment. Frequently, our phone conversations devolved into hang ups and tears. I was miserable for those three years. Absolutely. Miserable.
On paper, everything worked out well for us. I consulted experts and diligently managed the trust account. When my sister turned 21, I gladly gave her control over her accounts, and we gradually overcame our difficulties. Nevertheless, I found the three-year ordeal to be traumatic, so I would never put my own children in the same situation I found myself when my mother died.
A Trustee Must Be Trustworthy
Sadly, my experience is not unique. Too many people have their own horror stories about what it was like when a loved one passed away. Take, for example, my friend’s parents, the Petersons. They named their three children, in order of birth, their successor trustees. This decision provided that their eldest son Jeff would serve as successor trustee. If Jeff wasn’t able to serve, then their second son, Jason, would serve as trustee. And if Jason was unable to serve, then their daughter Kristen would serve as trustee.
Unfortunately, Jeff was financially irresponsible. He’d previously filed for bankruptcy and had come close to losing his home in foreclosure. Despite their concerns about Jeff’s financial history and his fitness to serve as a trustee, they rationalized that he “deserved” to manage their affairs upon their passing as the eldest child. Surely, he would be offended if one of his younger siblings was appointed instead.
Ultimately, the Petersons wanted everything in the trust to be distributed equally between their three kids; they believed that, while Jeff may have struggled personally with his finances, he would never financially harm his siblings. But by the time the Petersons passed away, Jeff was dealing with a failing business and impending divorce. Unbeknownst to his siblings, he quickly drained the trust account to bail out his business. His brother and sister had to spend $70,000 in a legal battle to save the proceeds from selling their parents’ house—the only asset left in the trust—and exclude Jeff from inheriting from those proceeds. In the end, they got some of their share of their inheritance, but the situation was very far from what their parents had envisioned. The moral of the story is that you must be careful when selecting a trustee.
A Unique Option for the Average Family
Experience is a great teacher. Right now, baby boomers are witnessing their aging parents’ challenges. They face the realities of emotional loss and the complexity involved with wealth transfer from one generation to the next. As a consequence, boomers have a newfound appreciation for drafting and updating their own estate planning documents. Over the next few decades, they, in turn, will transfer $30 trillion in assets to their Gen X and millennial children.
As we’ve seen, a plan is not enough on its own. An estate plan is only as sound as the person or entity charged with its execution. In other words, a well-drafted estate plan will fall short without an honest, detail-oriented, and fair trustee. Even assuming that everything goes according to plan, it is a wise and—more importantly—loving gesture to consider family dynamics and spare loved ones from burdensome financial responsibilities while grieving.
Serving as trustee involves a significant amount of work that can be overwhelming when stacked on top of existing work, family and community responsibilities. Some possible post-death actions may include:
- Securing and selling real estate, including changing locks, holding estate sales, distributing personal property, cleaning and maintenance.
- Corresponding with various financial institutions in order to collect trust assets.
- Conducting appraisals for certain trust assets, such as real estate, jewelry and artwork.
- Communicating often with beneficiaries so that everyone is informed of the status of the trustee’s efforts.
- Providing accountings to beneficiaries so they can track the amounts flowing in and out of the trust account.
- Notifying creditors and settling outstanding debts.
- Filing income and estate tax returns, as applicable.
- Distributing trust assets to beneficiaries as outlined in the trust document.
In the past, average families—who wanted to entrust an expert and spare loved ones the trouble—did not have the option to designate a corporate trustee. Fortunately, now they do because of Members Trust Company (“MTC”). MTC is owned and managed by credit unions, sharing the same community values of credit unions since it was founded in 1987. While many trust companies are raising minimum requirements to $1 million, MTC administers trust accounts with far more modest balances. MTC’s expert team of fiduciary and investment professionals will preserve your hard-earned assets and maximize the positive impact your financial legacy will have on your loved ones.
We retain our real-life experience and understand the struggles that families face when planning for the future. We’re committed to using our Wall Street expertise to uphold the Main Street values that support American family life. Call us today to schedule your initial consultation and give your family someone they can count on when they’ll need it most: (888) 727-9191.
About the Author
Andrea Brandon, JD is the Vice President of Marketing for Members Trust Company. Due to her experience with personal loss, she is passionate about conveying the importance of planning ahead with an estate plan and corporate trustee. And she warns women, in particular, about the risks they face if they fail to plan ahead for incapacity. After all, two thirds of Americans suffering with Alzheimer’s are women.
This article is for informational and educational purposes only and is not intended to provide specific legal or tax advice. For specific legal or tax advice, please consult with your attorney and/or accountant. Trust and Investment Products are uninsured, not guaranteed by Members Trust Company, any credit union, or any federal agency. Any investment exposes an investor to investment risk, including the possible loss of principal.