If you are like most people, you have a clear idea about who should receive your assets upon your death. However, selecting who will be responsible for ensuring your estate plan is faithfully carried out may be more challenging. When your estate plan includes a trust that directs the distribution of your assets, the person (or entity) you choose for this important job is called a trustee. Your trustee will have the obligation to act in the best interests of your beneficiaries and to manage and protect the trust assets on their behalf.
When selecting a trustee, the complexity of your estate plan, the identity and special circumstances, if any, of your beneficiaries, the duration of your trust, and the nature and value of your assets should all be considered. You should also ask yourself a few key questions before you select your trustee:
- Does the proposed trustee have sufficient expertise and experience to do the job?
A family member might be your first thought, but think carefully about that individual’s financial knowledge and ability to commit the time and attention needed to successfully administer your trust. A trustee must be able to handle the complexities (and stress) of trust administration, whether making investment decisions or navigating family dynamics. Although a trustee can delegate certain duties (e.g. investments) to an agent, the trustee must be prudent in selecting the agent and periodically review the agent’s actions. Serving as a trustee is not a hands-off job, so make sure you choose someone who is willing and able to be actively engaged in the trust’s administration.
- Does the proposed trustee have the appropriate demeanor to do the job?
Trustees must often make difficult choices. Choosing someone with good judgment and the resolve to make and defend decisions in the face of potential opposition from beneficiaries is extremely important. By the same token, trustees are often called upon to exercise discretion in making distributions or other decisions, so selecting a trustee who will thoughtfully carry out your intent and act impartially concerning your beneficiaries is crucial.
- Would it be more prudent to select a corporate trustee to do the job?
If your estate plan involves complex assets or your beneficiaries are prone to squabbles, a corporate trustee might be a smart choice. Corporate trustees offer professional services concerning investments, accounting and tax matters and are considered experts in trust administration. A corporate trustee is also a neutral party who can minimize or eliminate disputes among beneficiaries or serve as a liaison between fighting family members should a dispute develop.
Taking the time to think objectively about the characteristics of your estate plan, your beneficiaries and your proposed trustee should help you select the right person (or entity) for the trustee’s job. If you would like to discuss selecting or changing a trustee as part of your estate planning, please contact one of the attorneys in our Trusts & Estates Practice Group.
Understands family dynamics
Control kept with family
Possible conflict of interest if also a beneficiary
May not be able to remain neutral in event of dispute
Less sophisticated/less expertise
Less time to devote
Will need to retain attorneys, accountants, tax advisors, investment advisors, which can increase fees
Expertise, especially if assets are complex or substantial
Experience with trust administration
Professional services (tax, accounting, investments)
Liaison between family members
Held to higher standard of care
More expensive/higher fees
Less sympathetic to family dynamics
Control out of family’s hands
Insensitive, rigid, inflexible
If assets complex, additional fees might be charged