Trusts are an essential component of any effective estate plan. Families spend a lifetime building their wealth. To effectively preserve it, careful consideration should go into who should administer the family’s wealth for future generations. Selecting a qualified trustee to manage the family’s trust(s) and fulfill family wishes is critical, and many times misunderstood.
While it may seem logical to consider family or friends, it’s important to understand the responsibilities and potential liabilities involved with being a trustee and to gauge the willingness of that individual to serve as a trustee. This knowledge equips you to make an informed decision about who is best suited to manage your trust and preserve your wealth.
A qualified trustee should have the expertise and experience to handle all administrative and fiduciary duties, make objective and difficult decisions, navigate family dynamics without bias, and remove unnecessary burdens from your loved ones during a challenging time.
To help simplify this process, we’ve outlined a trustee’s key roles and obligations—and included tips on what to look for as you consider your options.
Roles and Responsibilities of a Trustee
A trustee is an individual or entity with the legal obligation to manage and administer your trust according to the terms of its agreement.
Depending on your needs, a co-trustee can be appointed to serve alongside your trustee. A successor trustee is also typically named to take possession of and manage your trust assets if your trustee resigns, becomes incapacitated, or passes away.
Being a trustee involves a multitude of roles and responsibilities, some of which may subject the trustee to potential liabilities. As a fiduciary, one of the most important responsibilities of a trustee is adhering to the trust document and protecting the best interests of beneficiaries. The trustee is also responsible for handling administrative duties, managing and protecting assets, and interacting with beneficiaries.
Handling Administrative Duties
- Read and interpret the trust document
- Determine whether probate is necessary
- Order death certificates and pay final expenses
- Inform banks, brokerage firms, and other financial institutions of the death
- Keep accurate and detailed records
- Obtain tax ID for trust and filing tax returns
- Track expenditures and additions to income and principal
- Issue notices required under state statute and the trust document
- Close accounts and transfer titles
- Collect death benefits, including life insurance and retirement plans
Protecting & Managing Assets
- Inventory assets, obtaining appraisals (as necessary) and determining value
- Update cost basis to the value at the date of death
- Invest, diversify, and preserve trust assets
- Manage assets to achieve reasonable growth with minimal risk
- Fund any sub-trusts correctly
- Sell or retain unique assets such as homes, cars, boats, LLC interests
Interacting with Beneficiaries
- Determine who the beneficiaries are and act in their best interests
- Treat all beneficiaries equally and impartially
- Use discretionary power to assess needs and make distributions
- Create and distribute final accountings to beneficiaries
- Issue statements and keep heirs informed of trust activities
- Decide if partial distributions are wise
- Distribute assets per the terms of the trust document
- Obtain consent for the final distribution of trust assets
Given the complex duties of a trustee, it can be beneficial to embrace the value of a corporate trustee like National Advisors Trust Company with a proven track record who understands trust accounting rather than place this burden on a friend or family member.
What to Look for In a Trustee
We recommend carefully weighing the knowledge, experience, and qualities that each potential trustee brings to the table rather than deciding based on cost or convenience.
It is also important to determine whether the potential trustee can devote the time and attention to detail required to manage your trust effectively and proactively.
Important qualities to look for in a trustee include:
- Expertise: An ideal trustee has a sophisticated understanding of trust law and accounting and a proven track record of successful trust administration.
- Prudence: Any potential trustee should show good sense and careful judgment when making decisions or taking actions related to your trust.
- Accountability: It’s essential to know that the person you choose as a trustee can reliably and successfully handle the many complex duties involved.
- Integrity: Your trustee should have a solid moral and ethical compass so you can trust them to honor their fiduciary duty.
- Impartiality: Serving as a trustee requires the ability to make trust decisions that benefit all beneficiaries equally. Corporate trustees operate under a fiduciary duty to act in the best interests of all heirs without bias or conflict of interest.
- Continuity: By selecting a corporate trustee, you can eliminate the “successor trustee risk” involved when another trustee must take over if your current appointee dies or can no longer fulfill their role.
Although it may seem easier to appoint a friend or family member, a corporate trustee with decades of experience, such as a National Advisors Trust Company, may be better positioned to handle a trustee's complex and time-consuming responsibilities.
Worthy of Your Trust
Selecting the right trustee provides peace of mind, knowing that your trust will serve your loved ones as you’ve intended and that your legacy will be in capable hands.
Your advisor and estate planning team can help you understand your options for selecting a trustee, including the benefits of a professional trustee like National Advisors Trust Company.
As the country’s premier independent trust company, we provide the flexibility of a corporate directed trust model and offer complete trust services with national reach to ensure the professional administration of trusts and fulfillment of fiduciary duties. We also offer ongoing education and tools to give you clarity and confidence at every point in your journey.
If you do not have an advisor, you can connect with one of the 6,000+ advisors in our national network.
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