Key Issues in Selecting a Trustee

A trustee should be designated any time you are creating a trust.  There are many types of trusts.  Sometimes we create trusts to be effective immediately.  Other times we create them within a will to be effective upon death or if certain events occur at death (for example, if your children are still minors when you die, a trust in your will might then become effective to hold bequests to your  children).planning 2

So who should you select as a trustee?  And who should you designate as successor trustee to take over in the event your original choice becomes unwilling or unable to fulfill the role.

The trustee of a trust has a number of key duties which may help you to understand who the proper trustee would be in your situation. The trustee has a duty to set up the trusts administrative and accounting procedures, and devise an investment plan for the assets. Investment plans are very important, as the goals of the trust will dictate what sorts of investments are included in the trust.

While there are numerous pluses and minuses in making any selection, here are a few things to keep in mind.  Does the individual know your family dynamics, know the beneficiaries and know your objectives in creating the trust?  Is the individual too close to your family or the beneficiaries so that undue pressure might be put on them by those people?  Will troublesome jealousy arise if one family member is selected over others?  Is the individual you are considering likely to die or retire before the anticipated term of the trust is complete?  If so, do you have successors who will be able to step in or are they of the same age so that those same issues are likely to arise with them at about the same time?

Depending on the size of your trust and the investments it is to hold, a corporate trustee might be something to consider.  Corporate trustees can be the trust department of a bank, brokerage firm, insurance company or credit union.  Private trust companies also fulfill these duties.  Different companies have varying rules on the fees they charge, the assets they handle (many will not handle real estate), the size trust they will accept and other requirements, so you should speak with a variety of companies before you select a corporate trustee. 

The downside of a corporate trustee for many people is the fee they charge.  Also, if the corporate trustee is a large institution, the trustee may be far away or very difficult to contact. But the positives of such a selection can easily counter balance that concern.

The benefits of having a corporate trustee include their professionalism and experience.  They are set up to manage trust assets, work with beneficiaries, deal with your professional team of attorneys, accountants and financial managers, while at the same time being impartial, skilled, and insured in case negligence does occur. Many people find the peace of mind of having a corporate trustee to be priceless.

Selecting a trustee is one of the most important decisions in your estate planning, and one that should not be taken lightly. Spend time talking with your estate planning attorney about what choices are right for you, and realize that choosing a trustee is not bestowing an “honor” on someone. You are placing the mantle of responsibility and a potentially huge burden on them.  While many friends and family members are more than happy to agree to take on that responsibility, it does not necessarily mean that they understand the extent of their obligations or are the best choice.

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