One of the hardest choices an individual can make when it comes to preparing his or her trust document is deciding who will be designated as trustee.
The trustee is the person who will be responsible for administering the terms of the trust, disbursing the property to the beneficiaries, investing the trust assets and protecting the assets until a distribution can be made.
The decision on who this person or persons will be is not an easy decision to make, and many factors should be considered when it comes to deciding who to appoint as trustee.
1. Experience and Background
Trustees are held to a strict fiduciary standard, meaning that all of their actions under the trust must be done in the best interests of the beneficiaries.
The individual or individuals chosen as trustee need to be knowledgeable in finances and accounting and be able to make tough financial decisions. It is for this reason that many people choose family members or friends who have experience in accounting or investments or at least have a legal background. This experience and background can prove to be helpful.
The trustee will need to be able to interpret legal documents, may need to understand various accounting and fiduciary rules, and will have to demonstrate caution and wise decision making in investment decisions.
In addition, the trustee must also be able to use discretion when making distributions to beneficiaries.
2. Ability to Remain Objective
When it comes to dealing with a family estate, emotions tend to run high. It can be extremely helpful if the individual has a good knowledge of the history of the family, as well as its dynamics.
But when it comes to appointing a family member as a trustee, the trustor needs to be assured that the appointed trustee will remove himself or herself from any family drama associated with the decision-making and distributing trust assets.
If the trustee is a family member or friend, it will be understandable that he or she will be suffering from grief after the trustor dies. However, this person needs to be able to separate himself or herself from emotion, especially as family members argue over who gets what family keepsakes.
These decisions are ones that are extremely sensitive and difficult, but they need to be made with an objective mindset. It is for this reason that many trustors choose to hire private professional fiduciaries or corporate trustees to separate emotion from these decisions. If family or friends are a concern when it comes to making these decisions, it is possible that this alternative could be helpful.
3. Consider Age and Longevity
Many trustors choose parents or relatives who are older than they are, and while that decision can be a good one in many situations, the problem is these individuals could potentially die before the trustor does.
While it is often recommended that relatives or friends who are not advanced in age be appointed as guardians for minor children, the same is recommended for a trustee. It is recommended that the trustee be someone who is expected to be around for a longer period of time so that amendments do not need to later be entered.
Granted, unexpected life events cannot be prevented, but it is still better assurance than having a trustee who is more advanced in age and is unlikely to outlive the trustor.
4. Evaluate Costs of Designating a Professional Trustee
Many people assume that a family member or friend will gladly step in as trustee and be able to handle the tasks required with no issues.
However, many times, these individual trustees will still have to hire an expert to help them with some of the more difficult aspects of the trust. Individual trustees often have to turn to attorneys for guidance who charge an hourly rate for their services. This money would be paid out of the trust, but the fees can get expensive.
It can help to have a professional trustee handle administering the trust since most corporate trustees are able to handle all aspects, including tax, investments, and real estate.
Discuss this option with an estate planning attorney to see if this is one that fits the specific situation of the trustor. Before deciding on a professional trustee, review the experience of that office and determine the costs that would be associated. Depending on the size of the trust estate, this option may be one that is well worth the investment.
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