Is establishing a trust part of your overall estate plan, or are you already in the process of doing so? It’s a sound legal and financial decision, but here comes the difficult part.

To whom may you entrust the management and administration of your trust and the protection of your financial legacy? In short, you’ll need to give strong thought to who you are picking as a trustee of a trust. Keep on reading for our full breakdown of how to choose a trustee.

Understanding the Role of the Trustee

A trustee designation is one of the most critical financial choices you’ll ever make.

Anyone you choose to handle your trust is legally obligated to act in your and your beneficiaries’ best interests at all times. Records management, administrative tasks, investment management, and contact with beneficiaries are just a few examples of a trustee’s numerous fiduciary obligations.

An individual trustee, a corporate trustee, or a combination of the two may serve as the trustee. Family members have benefits, but corporate trustees are better since they have the skills that family members don’t. As a result, weighing all of your alternatives is critical.

If you choose a trustee, they will be legally obligated to carry out the instructions in the trust agreement and to always act in the interests of your beneficiaries.

Picking an Individual Trustee

One advantage of appointing a close friend or family member to manage your trust is that they are more likely to understand your own financial philosophy and objectives.

They’ll know who you are and who will benefit from your generosity. With a wide range of personal experiences, they’ll be able to better comprehend the needs of those they serve and the intentions of the donor.

However, it’s not always as straightforward as it seems to choose a family member as your trustee. The individual you’re intending to entrust with administering your trust may regard it as a burden rather than an honor.

In addition, selecting a trustee who is actually qualified necessitates a careful and unbiased investigation on your behalf. There is no guarantee that your daughter is a CPA or that your closest friend who has known you for 50 years is the best option.

How About A Corporate Trustee?

It’s a big duty to be a trustee, therefore it’s a good idea to seek out the help of a professional corporate trustee.

They’ll have a comprehensive awareness of fiduciary responsibilities and substantial investment management experience, and they’ll have tremendous skills and resources.

In addition, a corporate trustee provides an impartial and unbiased perspective. A fiduciary obligation requires them to act objectively in accordance with the conditions of the trust.

When it comes to the more difficult choices required in running a trust, family members may have a harder difficulty being impartial; a corporate trustee, on the other hand, is insulated from such personal conflicts.

Corporate trustees, on the other hand, will still pay careful attention to what you have to say and keep your objectives front of mind at all times.

Whichever way you go, you should get some solid advice from an estate planning lawyer.

How Do You Choose a Trustee of a Trust?

Most individuals entrust the management of their assets to a close friend, a member of their family, a lawyer, or a corporation.

Regardless of your preferences, you should consider these four things before deciding on a trustee.

Availability and Time

In order to successfully administer a trust, trustees must be prepared to commit the necessary time. As a trustee, you’ll be expected to do a lot of work, such as:

• Filing income and estate tax returns;
• Maintaining property;
• Securing and selling real estate;
• Conducting appraisals for personal items, like jewelry and artwork;
• Hosting estate sales;
• Notifying creditors of outstanding debts;
• Keeping records of trust account activity;
• Communicating with beneficiaries;

Trustees may be required to spend a significant amount of time reviewing petitions. They need to render final distribution decisions, depending on the nature of the assets under management.

There are several obligations that might make it difficult for trustees to react swiftly to time-sensitive requests from beneficiaries.

Sense of Responsibility

Trustee duties include keeping an eye on how much money is going to each beneficiary. The trustees of certain trusts may be given clear instructions regarding what kinds of distributions they may make. But, in most cases, they will have to make their own decisions.

Trustees who have a close connection with the beneficiaries may find it difficult to make unbiased choices. Grief and complicated family relationships might make this task more challenging.

You may have to withhold money from a relative who is financially irresponsible. But, because you’re a trustee, you’ll worry that it will damage your relationship.

Sure, corporate trustees lack an intimate understanding of family ties. But, they have the capacity to make objective judgments. They are required to behave in the best interest of the beneficiaries.

Individual trustees may become disabled or die. While trust officers are always present to manage the trust with institutional trustees.

Expertise

Assuming that the individual trustees lack experience, they might easily make errors. Individual trustee actions are not examined by auditors.

Significant mistakes might go unnoticed for years, leading to huge penalties or legal action. Corporate trustees are audited by both internal auditors and government regulators. It’s essential to ensure that trust assets are being properly managed.

Compliance procedures and fiduciary duties are examined by these auditors. Trustee teams for institutions often include accountants, lawyers, and compliance experts.

The Cost

Fees charged by corporate trustees are typically determined by the value of the trust’s assets multiplied by a percentage. One bundled price covers all services provided by trust corporations or corporate trustees.

There may be situations when individual trustees may not charge fees for their services in managing the trust. There may be additional costs for individual trustees to consult with hired lawyers or portfolio managers. It depends on the sort of assets that are in the trust.

Estate Planning: The Trustee Edition

You should reassess your trustee every several years, whichever you pick. You can’t be sure that the guy who is correct now will be correct tomorrow.

When it comes to choosing a trustee, you should consult with a lawyer to aid you. We hope that our guide has helped shed some light on how to select the right trustee of a trust. And, you should check out our legal section for more tips and explainers.