Depending upon what you are trying to accomplish, the successor trustee might best be a corporate or private fiduciary or a close family member or friend. If you design continuing trusts with asset protection features for your children, having a trustee that is a “discretionary” trustee provides the highest level of asset protection. The discretionary trustee can turn the faucet to the continuing trust off and on when there are creditor threats to the beneficiary of the trust. Such threats include divorcing spouses, lawsuits and creditors who could step into the shoes of the beneficiary if the right provisions and trustee are not in place.

A discretionary trustee under IRS code Section 672(c) is someone not related to or subordinate to the grantors or the beneficiaries of the trust. This means in order to have a discretionary trustee you need someone not directly related (no parents, siblings or children) to or working for the grantors or beneficiaries of the trust. However, if your heart is set on having your sister or brother as the successor trustee and still have a measure of asset protection for your children, you can do this by instructing them that if their child ever goes through a divorce, has a lawsuit lodged against them or has other creditor problems, that brother or sister should resign as the trustee immediately. Then, if you have a discretionary trustee as a secondary successor trustee, they can accept the appointment of trustee over the trust for your child. The discretionary trustee can be a bank, trust company, private fiduciary, a more remote family member (not a first degree relative), or even a close family friend, your CPA or attorney.