Question: My son has creditor problems and is in the middle of a divorce. Is this a problem if I name him trustee of my trust?
Since you indicated that the trust is yours, then I will assume that the trust will last during your lifetime and terminate at death. If it is a revocable trust, then you can be your own trustee and name your son as successor trustee in the event you become incapacitated or upon your death. If you create and irrevocable trust, then you cannot be trustee, but can name your son as trustee to manage the trust during your lifetime and disburse assets at your death.
The fact that your son has credit problems does not jeopardize your trust. His creditors have no right to assets held in your trust, even if he is trustee. However, if your son has mismanaged his money, he may be a poor choice for trustee. A trustee has the responsibility of managing and investing your assets to create income and growth during your lifetime. The question is whether or not your son has the skills to handle this job.
With respect to his pending divorce, there is no reason why he cannot act as trustee. The assets in the trust are yours and have absolutely nothing to do with divorce proceedings between your son and his spouse. With that being said, you may want to provide that upon your death, distributions to your children shall be made to a descendants trust and not out right. If upon your death the assets were to pass directly to your children, they would be subjected to claims of their creditors and discoverable in a divorce proceeding. That being said, it would be better to create a descendants trust. This will protect your children from outside invaders such as the IRS, creditors and divorcing spouses.
By Nancy Burner, Esq.