Picking the Right Trustee
Marie is going through a divorce and about to buy $600,000 in life insurance. Her 9-year-old daughter would be the beneficiary. She needs a trustee but doesn't have a clear choice for who that would be.
QUESTION: Marie in Memphis is going through a divorce and about to buy $600,000 in life insurance. Her 9-year-old daughter would be the beneficiary. She needs a trustee but doesn’t have a clear choice for who that would be. How does she pick the trustee?
ANSWER: She wouldn’t be the beneficiary. You would leave it in a trust for her benefit. Don’t leave the money to her. A trustee can steal if they don’t have integrity, and your husband might talk your father-in-law into doing something illegal, which is using the 9-year-old’s money to buy him a car. So he can’t be the trustee.
You can hire an attorney as a trustee to execute the trust upon your death. If you had an attorney draft your will, as an example, you could name that attorney as the trustee, or someone in their firm, or something like that. You can hire a hired-gun trustee, and there are banks that have trust departments.
You’ve got to clearly spell out in your trust what you want done with the money. You can be very specific, and you can trust that they’ll actually do it if it’s an attorney or a trust department. But you have to tell them exactly what you want done. Don’t say to invest the money appropriately, because what a banker views as an appropriate investment and what I view as an appropriate investment are two different things, usually. The banker might put it all in certificates of deposit, and I might put it in mutual funds.
It would be up to a family member (if you choose) to execute the trust, but they could steal, which is doing anything with that money except what the trust says. Usually, a trust for the child says something like pay for their first car, college, major medical breakdown of some kind and those types of things. The balance of the money goes to them, and a monthly stipend off of it for food and stuff, but then the rest of it goes to them when they are in their 20s or something.
You can lay it out that way, but you have to have someone who will follow the directions.