One aspect of estate planning that deserves far more attention than it usually gets is the question of who would be most qualified and effective in the role of trustee. Lawyers can prepare estate planning documents of superb technical quality, but if the fiduciaries entrusted to implement the directives in those documents are in any way inappropriate, the client’s goals likely will fail to be achieved.
Choosing A Trustee: Who To Pick?
Who is best suited to serve as a trustee or co-trustee? That depends on individual circumstances, which, of course, can vary dramatically. Often friends or family members agree to serve as trustees based solely on their relationships with the grantor of the trust. After all, the thinking goes, who better to serve as trustee than someone who has been part of your life for many years?
Whether you are choosing a friend, family member or corporate trustee, consider several factors and qualities – time, responsibility, cost, and expertise.
Look for someone who has time to devote to managing your trust and assets. It may be difficult for someone with a busy career and family to file tax returns, maintain property, and communicate with beneficiaries.
Making distribution decisions for a trust can be complicated for those with a personal relationship or who are dealing with grief. Corporate trustees help eliminate some of that close personal relationship and can aid in the decision-making process.
Although individual trustees might not charge a fee, they hire professionals to assist them with various responsibilities. While corporate trustees do charge a fee, one of the greatest advantages to having a corporate trustee is the value that their expertise can bring to the assets in trust.
Individual trustees are more likely to make mistakes that can go years before being noticed. Corporate trustees have experience and are held to high standards and audits, which help ensure compliance and that they follow the fiduciary duty. At Trust Point, we have always used the fiduciary standard as our guide for over 110 years and will continue to apply it to all of our activities and services, not just the ones that we are legally required to uphold.
Family or Close Friends Aren’t Always Best
A close personal relationship isn’t necessarily the best qualification to serve as a trustee. In many situations, designating an independent, professional trustee is a better option. (That is why a number of our clients choose Trust Point for the role of trustee or co-trustee. Even though there may be costs associated with it, having a professional trained on the ins and outs of investments, taxes, account administration, and legal issues are invaluable.
In some estate plans, co-trustees are designated with one being a professional and the other a family member or friend. Such arrangements can be designed in different ways, with some requiring co-trustees to agree on all decisions and others dividing up responsibilities. For instance, a trust company can track tax issues, issue account statements, and make investment decisions, while a family member is in charge of decisions about distributions.
Potential Liability of a Trustee
Potential liability is a serious issue for any trustee or co-trustee. Liability claims related to trustee services are not usually made by the grantor of the trust, but most often by trust beneficiaries. A trustee has a duty of loyalty to both the trust grantor and the beneficiary, as well as a duty of impartiality among multiple beneficiaries.
Professional liability claims related to trustee services frequently allege one or more of the following:
- The trustee influenced the distribution of trust assets to the detriment of one or more beneficiaries.
- The trustee mismanaged the affairs of the trust or failed to protect its assets.
- The trustee made bad investment decisions or gave bad advice regarding trust assets.
The primary duty of a trustee or co-trustee is to administer the trust in accordance with the terms specified in the trust document. That may sound simple and even stodgy, but it means that “trustee” is not a job for the faint of heart—because family squabbles can get very ugly when trust documents are subject to interpretation and money is involved. Thus, designating trustees (and successor trustees) who can handle all of the responsibility is among the most critical considerations in a successful estate planning process.
Contact The professionals at Trust Point for Help!
Trust Point was founded as a trust company as its primary purpose over a century ago. We continue to be an industry leader in trustee services. Please contact us today if you want to explore how we can help you set-up a trust that meets all of your long-term goals and wishes.