Estate Settlement: When Family Members Might Not Be the Best Solution

Written by: Terry Doyle, Director of Fiduciary Sales

When someone updates their estate plan, an important decision involves who will take care of financial affairs once they die or face incapacity. Very often, the choice is made to name a family member – spouse, sibling or child – to take on the responsibility. This choice is often made with too little consideration and many times without consulting the individual who is nominated to take the role.

What if the person who is nominated is unwilling to accept the responsibility of settling your estate? Worse yet, what if they are a poor choice, based on any number of reasons? Let's break down these issues.

Issue #1: Choosing someone unwilling or unable to serve.

What if the person named as successor trustee or personal representative (PR) is unwilling or unable to accept the responsibility of settling your estate?

Hopefully, your attorney has asked you, “If your sister/son isn’t able to do it, who are your second and third choices?” Being named as successor trustee or PR does not obligate that person to serve. Obviously, if they predecease you, they are unable to serve. Also – and this is often overlooked – being named does not create a “Tag! You’re it!” scenario. Once again, being nominated to serve as a successor trustee or PR does not create an obligation to serve. They can simply say “no”, decline the appointment, and are under no obligation to find someone else to accept the role. If no second choice was named in the document, then a court may have to appoint a party to settle the estate. Suffice it to say, having alternative successors named in a trust document or Will is always a good idea.

Issue #2: Making a poor choice.

What if the individual chosen is willing to accept the role but is unlikely to execute the duties needed to settle your financial affairs? Worse yet, what if the individual isn’t trusted by other family members? Either situation could lead to legal action, maybe between family members.

Take the recent case of Tony Bennett. The legendary singer passed away in 2023. He has five surviving children, including his son, Danny Bennett, who he had named as successor trustee of the family trust. Two of his daughters are suing their brother, accusing him of withholding information about their father’s estate. Their complaint states, “[a]lthough Danny and his counsel have provided piecemeal information and produced some documents to petitioners’ counsel, the information provided raises more questions than answers and fails to provide anything close to an accounting of Tony’s assets and financial affairs.”

This case highlights three issues relevant to choosing a family member as a successor trustee. First, does the person have the trust and confidence of family members or others who are beneficiaries of the trust or estate? Second, does the person named have the knowledge and expertise to fulfill the duties required or a successor trustee? And third, is the person willing and able to accept the role?

Danny Bennett was obviously willing, since he agreed to accept the role of successor trustee. As for his knowledge, it can be assumed he possessed knowledge of his father’s estate, but whether he understood the totality of his duties as a trustee seems questionable. Finally, addressing the issue of trust and confidence of the family, given that two of his siblings have filed suit to have him removed as trustee, indicates there is a problem.

The outcome of the Bennett situation remains to be determined, but it is highly likely there will be significant legal expenditures by the trustee and his siblings. Could the current situation have been avoided by choosing a different successor trustee?

When to choose a corporate trustee

First, a corporate trustee can be a good solution in situations requiring a successor trustee. Unlike an individual trustee, corporate trustees are regulated and examined by state and federal agencies. As a result, they have professional skills, experience, and understand their duties to a much higher degree than an individual trustee.

Second, a corporate trustee will fulfill their duties with impartiality, free of potential coercion of family members. They perform their duties based strictly on the intent of the creator of the trust.

Finally, choosing a corporate trustee minimizes the chances of collateral family discord, where some family members might feel slighted by having another family member being “favored” by being chosen for the role, or stirring up feelings of distrust based on lingering sibling rivalries. In the Bennett case, it is likely the family discord could have been reduced or perhaps eliminated entirely. A corporate trustee would provide full and timely accountings to the beneficiaries of all trust-related matters, negating the need for a court action to force the compliance of the trustee. Further, a corporate trustee would ensure the timely filing of any federal or state estate tax returns (if required) and ensure the creation and distribution to beneficiaries of any tax information related to assets received from the estate. Once again, the experience and professionalism of a corporate trustee can greatly enhance the settlement of estate matters while avoiding family discord.

Corporate trustees will honestly and objectively make decisions. Though some might feel they owe it to a particular family member to name them as a trustee or PR, it is important to consider both the family situation as well as the time and effort required to fulfill the role. There are many factors to consider when choosing a trustee. However, if the goals are objectivity, fulfilling your intentions, and professional administration, a corporate trustee might be the best choice.

Prairie Trust is here to help.

When you name Prairie Trust as your corporate trustee, our job is to ensure your instructions are carried out and – most importantly – ensure your loved ones are provided for during a difficult time.