Choosing the right trustee for your estate is one of the most important decisions you can make once you decide to set up a trust. You’ve worked hard to create a successful enterprise. Whether you’ve managed a portfolio, built your own business, or have been near the top of your professional field, it has been your shrewd decision making process that has made you successful. That same astute thought process certainly carries over into what you want to do when it comes to distributing your assets.
Once you’ve decided to set up a trust as part of your estate plan, the next question becomes who can you trust to carry your well-thought out plans. So who do you choose to be your trustee?
Family Members
Often, the first thought goes to family. Maybe your child or possibly your wife or husband sound like the right option. A trustee must accept specific duties and the related liabilities that differ by state. Impartiality between the interests of beneficiaries, correctly accounting to all beneficiaries, thoughtfully investing trust funds, managing trust property, and following the prohibition against self-dealing, are just some of the duties a trustee must fulfill.
That means your chosen trustee must be able to separate their personal feelings and interests from those of the beneficiaries. They must be able to remain impartial. This can get tricky, for example, if you have children from multiple marriages. It also is helpful for them to have a background in investing, and, therefore, be able to get the most out of the trust without risking it all. For a child who may be in the middle or early stages of their career or may have just set out to start a family, it is important to ask yourself if you believe they truly have the time to properly manage the trust.
In good news, family is generally free and won’t charge you an administrative fee, and they are generally willing to do their best to follow your wishes. Unfortunately, tensions between siblings or other members of a family might rise if one and not another is put incharge. Furthermore, a family member without any trust experience may unintentionally abuse the trust.
Lawyers Or Advisors
Of course, there is always the option of having your attorney or financial advisor act as your trustee. These professionals usually have a good understanding of personal and financial goals and has at least some understanding of how this works. They also don’t have the family ties that could cause resentment between relatives.
It’s important to consider the amount of experience your lawyer or advisor has with trusts. It’s also necessary for them to have an understanding of how your family works. Furthermore, if there happens to be a significant financial loss to the trust, the trustee will need to be able to satisfy a judgement if professional malpractice coverage won’t make the trust whole.
Lawyers and financial advisors tend to charge higher fees than corporate trustees. And for lawyers, it might end up being a conflict of interest.
Banks Or Trust Company
Banks or trust companies provide another option. They are called corporate trusts and can provide professional fiduciary service, while acting independently. Trusts are what they do, so there is less reason to be concerned about how they manage investments. They have capital reserve requirements, which means they are able to replace lost trust value if necessary.
What you need to take into consideration is whether these larger companies, and the individuals who work for them, are willing to take the time to really understand your family dynamic. In some ways it’s nice that there’s a lack of personal touch, but in other ways you may be looking for that. Corporate trusts will certainly charge a fee, but it will most likely be less than your lawyer or financial advisor.
Conclusion
There is a lot to consider when setting up a trust, and choosing a trustee you trust to follow your wishes is one of the most important choices to be made. All of the options above provide you with different opportunities and drawbacks. Hopefully, this story provided you some insights into what to think about when you choose to make that decision with your estate plan.
