How to Choose a Trustee

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The Trustee has two basic duties:

 

First, to manage and invest funds in a very careful manner, taking care to not mingle trust assets with any personal assets of the Trustee.

 

Second, to distribute trust funds to beneficiaries named in the trust document, when and how specified in the trust document.

 

The Trustee must of course keep careful and accurate records of all trust assets, income, and distributions. And the Trustee must be entirely trustworthy (hence the source of that phrase) since the duty of a Trustee is one of the very highest the law requires and recognizes.

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So, the Trustee that a Trust Maker appoints must have the skills, training, experience, and ability to adequately perform such duties.

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Who to Name as a Trustee

 

Normally, the person making a Revocable Trust will name himself or herself as the initial Trustee, and then designate successors to serve as Trustee in the event of disability or upon the death of the Trust Maker.

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Often, the first choice may well be the spouse of the Trust Maker, unless other reasons dictate a different choice. You may have responsible adult children whom you can appoint as a Successor Trustee. Otherwise you must look elsewhere for a Successor Trustee, with some Trust Makers choosing wise and responsible adult relatives to serve.

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We usually recommend that the person who manages trust funds for the children not be named as Guardian of the children, to avoid any actual or perceived conflict of interest for the person designated. If a Trustee has discretion to spend funds it removes any potential conflict of interest if the Guardian must request funds from the Trustee rather than serving as Trustee and making disbursements without oversight of anyone. This consideration is critical if your Trust includes provisions to allow the Trustee to spend funds for the benefit of your Guardians, such as instructions to allow the Guardians to move to a larger home for the benefit of your children, or instructions to allow your Guardians to live a lifestyle similar to one that you would want to provide for your children.

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Some Trust Makers choose to designate a Corporate Fiduciary, such as a Bank Trust Department to serve as Trustee. Others choose trusted advisors such as their long-term CPA, a choice we often suggest since a CPA will have the ability to keep the required accurate records and is usually able to seek competent investment advisors for Trust investments.

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Make a List and Check It Twice

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Remember what Santa does: He makes a list and checks it twice. This step is just as important for you when choosing Successor Trustees. Consider the age and ability of each potential Trustee. You may not want to burden your own relatives who may not want to devote the time and energy needed to serve. 

 

You may change the Successor Trustee as required by passage of time or for other reasons. Normally, you need not worry if all your chosen successors fail or refuse to accept the job of being a Trustee because the Trust itself, or applicable laws, provide for ways to fill any vacancy.

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Call us today for a consultation.