To be certain that their wishes are followed (during lifetime and after death), many people create a trust to hold most of their assets. One of the tasks in the process of creating (or updating) a trust is to designate the person who can best carry out your plans when you can no longer act due to death or incapacity. That person is referred to as the trustee.
Kiplinger’s recent article, “How to Choose the Right Trustee for Your Estate,” explains that being a trustee means accepting specific duties and obligations. For example, showing impartiality between the interests of the current and future beneficiaries, accurately accounting to all beneficiaries, wisely investing trust funds, managing trust property and adhering to the prohibition against self-dealing.
It’s important to understand the strengths and weaknesses of your trustee and plan accordingly. Furthermore, it’s important that the trustee appreciates the significance of their responsibilities and is comfortable with the risk of personal liability to the trust beneficiaries. When considering a trustee, ask yourself these questions:
Can your trustee separate his or her personal feelings and interests from those of the beneficiaries and exercise sound judgment?
Will your trustee treat all the beneficiaries impartially?
Is your trustee financially savvy enough to analyze investments and/or work with professional advisors?
Will a child who is balancing a family and career have enough time to devote to serving as trustee? Should co-trustees be appointed so that responsibilities may be delegated among two or more persons?
It’s generally safe to say that family members are closer to the beneficiaries and are therefore more likely to understand their needs. A family member trustee may charge her costs to the trust and may or may not charge an administrative fee.
Their are downsides to family member trustees in some cases. When one sibling is selected over another as trustee, it can trigger various feelings and resentments among the beneficiaries. A relative without any trust experience may run into trouble, because of his or her ignorance. Fortunately, your trustee can work with a lawyer and other professionals to assist them in the fulfillment of their duties.
If you choose an attorney, accountant, or financial adviser as trustee, ask yourself these questions:
Can they understand the unique dynamics of your family?
What experience does the person have as a trustee? Do they have experience with assets similar to yours?
What are the fees are associated with being a trustee?
You can also select a corporate trustee. Banks and trust companies provide professional fiduciary services and act independently. Opting for a corporate fiduciary may eliminate some of the conflicts in the family, while providing experienced and professional investment and administrative management. Think about these questions as they relate to a corporate trustee:
Will they invest the time to understand my family and their needs?
What are the corporate trustee’s standards?
Does the trustee understand the goals of my trust?
What are the corporate trustee’s fees?
Corporate trustees follow specific procedures to ensure unbiased and professional services.
Although there is a growing a place for professional and corporate trustees, most people still wind up choosing a family member or friend as trustee. If you decide to go with a family member or friend, be sure and also choose a successor trustee (backup) in case something happens to your primary trustee. Professional and corporate fiduciaries can also be good choices as successor trustees. Finally, you can choose to provide any trustee with a power to appoint a successor trustee or co-trustee of their choosing.
Many of the answers to these questions will depend on the size and the nature of your trust. Talk to a trust attorney about all of the details.
Reference: Kiplinger (November 20, 2018) “How to Choose the Right Trustee for Your Estate”