The first step in setting up a living trust and choosing a trustee is fairly simple.
"When you draw up a trust, generally you name yourself as the initial trustee, but you also at the same time are going to name a successor trustee. So if you can't handle your own affairs, say you become incapacitated your successor trustee is going to step in to take care of your financial affairs during that time," said Diane Chong of Central Pacific Bank.
When you recover, control of the trust returns to you. But the obvious question is - how do you go about selecting a successor trustee?
"Naming a successor trustee is really an important decision because that person is going to be responsible to make sure that your wishes are carried out in the proper and in a timely manner. So many people will name their spouse or their adult children as their successor trustee, but you could also consider naming a corporate trustee," Chong says.
There are some advantages to choosing a corporate trustee - what is that?
"A corporate trustee is a bank trust department or trust company that will handle your affairs should you not be able to do so," Chong says.
There is another obvious advantage. Suppose there are two siblings and only one of them is appointed to be the trustee. Rivalries could soon develop about what to do with the estate.
"A corporate trustee can be very objective and also they are regulated by state and federal agencies so you can make sure that your wishes are carried out properly," Chong says.
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