For many people, a trust is an integral part of a thorough and effective estate plan. Whether it is designed to avoid probate, reduce estate taxes, or protect assets, it is important that a trust is administered as instructed in the trust document to ensure that it serves its purpose. Therefore, one of the most important decisions you make when creating a trust document is selecting a trustee to administer the trust on your behalf.
Duties of a Trustee
A trustee will be called upon to implement the framework set out in the trust document. In doing so, the trustee will take on great responsibility including regular accounting, managing investments, paying bills, and preparing tax returns. The trustee must also communicate with the beneficiaries regarding the trust assets and distributions. In performing these duties, the trustee has a fiduciary duty to act in the best interests of both you and the beneficiaries for the lifetime of the trust.
Qualities of a Trustee
A trustee should be financially savvy, or be knowledgeable about resources available, to properly manage finances and investments. The trustee should also be trustworthy, demonstrate good judgment, and maintain confidentiality. They should be prepared to listen to the beneficiaries’ needs and make independent decisions regarding what is best for the trust as a whole and for each beneficiary. You also want to select someone who has the time and availability to dedicate to the role.
Consider the Pros and Cons
Options for filling the role of trustee include a professional, such as an attorney, accountant, or trust company, or a friend or family member. There are pros and cons to each that should be considered.
A professional has the experience needed to administer a trust and the resources available to dedicate to ongoing management, reporting, and communication. However, a professional may be more conservative or inflexible than someone who is familiar with the grantor’s values and priorities. There may also be a fee involved in the service.
A friend or family member will know you and your priorities better and may charge a reduced fee (or no fee at all) but could feel more pressure from beneficiaries to make certain decisions. For example, they may be afraid to say “no” or feel pressured into saying “yes” based on feedback from beneficiaries.
No matter who you choose, it is important to communicate your wishes and your intentions with the trustee ahead of time. This will ensure that the trust is serving its purpose and your wishes are being met.
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