Ultimately, how well a wealth transfer plan fulfills a person’s legacy and meets the needs of the next – and future – generations depends on whom is named as trustee or co-trustees. Trustees are the people that family members rely upon to protect and preserve their wealth. They also help navigate taxes, distribute funds, and track what is owned. The qualities required to carry out these duties makes the selection of a trustee one of the most critical aspects of an already complex wealth transfer planning process.
In family offices, the role of trustee may be undertaken by members of the family office staff, or as a combination of family office staff and family members, trusted advisors to the family, long-time family friends, or members of a law firm or trust bank. Many Trusts are established with a close circle of individuals serving as trustee or co-trustees, but invariably over time people age and priorities change, giving rise to the importance of making a plan for trustee succession.
Since every family’s situation is unique, evaluating candidates for these three traits will help with selecting the right trustee(s) for carrying out the family member’s vision for their family and their legacy.
It is fundamental to its success to identify trustees with the right mix of expertise and compassion to manage the wealth plan. It is important to select someone (or multiple people) who can effectively communicate with beneficiaries and provide the stewardship needed to address their needs and concerns in a fair and balanced manner.
If a wealth plan aims to benefit children and grandchildren, a trustee succession plan is essential. Regardless of the duration of the plan, it is inevitable that one or more named trustees or advisors will be unable to serve at some point. Planning for these contingencies requires careful evaluation.
Two different but interrelated factors – family dynamics and the investment portfolio – must be assessed to understand the true complexity of the wealth owner’s wealth transfer goals and trustee designations.
After working through the considerations and needs specific to the family’s intentions, some families may choose to keep the responsibilities within the family and name individual family members as trustees, while others choose a family friend or trusted advisor. These choices make sense because they provide a measure of comfort and trust.
Others choose a corporate trustee or co-trustee to insulate their family members and friends from the fiduciary liability required of the role and to access the experience and resources of an institution.
Trustee succession is paramount in wealth transfer planning for family offices. Selecting the right trustees and ensuring a smooth transition can significantly impact the successful management and preservation of family assets across generations. Whether opting for individual trustees, corporate trustees, or a co-trustee arrangement, it is crucial to work with family members to consider factors such as expertise, continuity planning, and the ability to navigate family dynamics. Trustee succession planning is a vital component of long-term wealth management strategies for family offices to secure the financial well-being of future generations.
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