Planning an estate can be particularly challenging for individuals without family members to designate as trustees or decision-makers. The absence of trusted relatives prompts essential questions about who will manage assets and make critical health care decisions.
When selecting a successor trustee, one must understand that this role does not necessarily require a family member. Options include a close friend, a corporate trustee such as a bank trust department, or a licensed professional. Each choice carries different implications and responsibilities.
Choosing the Right Trustee
For those with straightforward estate assets, appointing a trusted friend as a trustee may suffice. This individual would manage assets should the owner become incapacitated and ensure proper distribution after death. Responsibilities include settling bills, marshalling assets, and distributing them according to the specified percentages in the estate plan. It is crucial that the chosen friend is willing to accept this role, as they will face legal obligations and potential liabilities for any mismanagement.
In cases where the estate is more complex, or if there are no suitable friends available, individuals might consider a corporate trustee. Many national banks and dedicated trust companies offer trustee services. The advantages of a corporate trustee include their experience in handling diverse assets and the assurance that they will continue to manage the estate even if they outlive the original owner. However, this service typically incurs annual fees ranging from 1 to 2 percent of the total assets managed, along with minimum asset requirements that can vary from $500,000 to $5 million.
Before making a decision, prospective clients should inquire about the corporate trustee’s fee structure, asset acceptance policies, and any specific language needed in the trust documents.
Exploring Professional Fiduciaries
For those who may not find a friend or corporate trustee suitable, or who prefer another alternative, hiring a professional fiduciary presents a viable option. Licensed and regulated by the state of California, professional fiduciaries are required to adhere to strict ethical standards. They undergo extensive training, including passing a statewide exam, completing continuing education, and undergoing background checks.
These professionals are accountable for any actions taken on behalf of their clients, including those of any assistants they employ. While they provide valuable services, it is essential to understand their fee structures and succession plans should they be unable to serve.
Individuals can locate a professional fiduciary through the Professional Fiduciary Association of California website at pfac-pro.org.
Choosing who will act as your power of attorney and health care agent is another deeply personal decision. Many individuals opt for trusted friends in these roles, especially when corporate trustees may not have the personal knowledge needed to make specific health care decisions.
Some clients establish mutual agreements with friends to act on each other’s behalf when necessary. Engaging with a professional fiduciary for these roles can also be beneficial, but it is advisable to discuss preferences with the fiduciary before making formal appointments.
Designating Your Beneficiaries
For individuals without close family members or those who prefer not to leave their estate to relatives, establishing a clear estate plan is vital. Without one, estates may be distributed according to intestacy laws, often resulting in assets being allocated to distant relatives. This outcome may not align with the deceased’s wishes, potentially leaving assets to individuals unknown to them.
By creating a comprehensive estate plan, individuals can designate friends, colleagues, or charitable organizations as beneficiaries, ensuring their assets are distributed according to their preferences.
Ultimately, while the absence of family can complicate estate planning, individuals have various options. Whether relying on friends, corporate trustees, or professional fiduciaries, it is essential to make informed choices to ensure that one’s wishes are honored.
Teresa J. Rhyne is an attorney specializing in estate planning and trust administration, based in Riverside and Paso Robles, California. For inquiries, she can be reached at [email protected].