Selecting a trustee to manage your estate after you pass away is an important decision. Depending on the type of trust you’re creating, the trustee will be in charge of overseeing your assets and the assets of your family. In general, people choose either a friend or family member or alternatively decide to go with a professional trustee or a trust company or corporate trustee for this critical role.
Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.
If you go with a family member or friend, they should be financially savvy and good with money. You want someone who knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor.
A good thing about selecting a friend or family member as trustee is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics. Family members also usually don’t charge a trustee fee (although they are entitled to do so).
Depending on your family dynamics and personalities, however, your family may be better off with a professional trustee such as a private fiduciary or trust company that has expertise with trust administration. This may eliminate some potentially hard feelings in the family. Because your family member may be too close to the family and may get caught up in the drama, a neutral third party can also act as a barrier to potential fights and arguments. Certain family members may also end up having a power trip and enjoy having total control of your beneficiary’s finances a bit too much.
Trust companies, especially larger ones, will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company when the beneficiaries don’t get along, when there is a problem beneficiary, or when the trustee is responsible for managing a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions if it will reduce the assets under management that they’re investing. You can solve this by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee in your trust documents.
Some people may also choose to have an attorney serve as their trustee. The advantage of a trusted attorney serving as a trustee is that they have familiarity with your family if you’ve worked together for some time. There will, however, be a charge for their time spent serving as trustee.
Talk to your estate planning attorney and go through your concerns to find a trustee solution that works for you and your family.
Reference: Forbes (May 31, 2019) “How To Choose A Trustee”