Choosing the Right Trustee for Your Needs

Johnnie Pratt
Choosing the Right Trustee for Your Needs

A trustee can be an individual (friend or family member) or a professional, such as a lawyer, CPA or trust company. Acting as a trustee requires attention to detail, record-keeping and communication with beneficiaries.

Often, people choose family members to serve because they are familiar with their personal goals and financial circumstances. However, serving as a trustee can be a disaster for someone who does not understand the scope and legal responsibilities of this role. So if you need more information you should contact a Trusted trustee for your needs.

Choosing a Trustee

The person you choose as your trustee can be an individual (such as a family member or close friend), a professional trustee or a trust company. A trustee should have good record-keeping skills and be able to communicate with beneficiaries of the trust in an understandable manner.

A trustee is legally bound to follow the instructions outlined in your trust document. Therefore, it is important to consider how well the trustee you select will be able to separate their own feelings and interests from those of your beneficiaries.

Generally speaking, it is not a good idea to name family members as trustees, unless you provide specific training for them in the event that they are called upon to act. This is due to the potential for family dynamics to create distrust and dissension, especially if you are putting assets into trust for your own children or other heirs. You can avoid this by choosing a professional trustee or even having co-trustees.

Choosing a Lawyer

If you decide to appoint an individual, you must carefully weigh their qualifications for this role. Often, the person you nominate is too busy or not capable of administering the trust. They may have other priorities or their own financial responsibilities. They may also have existing relationships with beneficiaries that cause them to appear or actually be partial, which is a violation of fiduciary law.

It is important to remember that the role of trustee is a tremendous responsibility and privilege. It is often a time-consuming, complex, and stressful job that requires knowledge of tax law, investments, real estate, and recordkeeping. An individual or corporation who has substantial fiduciary experience should be considered.

Sometimes, the best solution is a professional trustee (individual or corporate) and a family member or friend working together as co-trustees. The family member brings familiarity with your family and your beneficiaries, while the professional has a level of expertise and objectivity that many individuals cannot offer.

Choosing a Financial Advisor

The world of financial advisors is vast, and there are many types to choose from. Some focus on holistic planning, while others focus on specific investment vehicles or retirement. Some have specialized certifications, such as the CLU (Chartered Life Underwriter), which indicates their expertise in estate planning and insurance.

The important thing is that you find someone who understands your situation and goals. This person must be able to put their own personal goals aside and follow the instructions of the Trust as written.

It’s also critical that you understand how the advisor gets paid. They may earn compensation through a flat fee, commissions on investments they sell you, or a combination of these. They should be able to explain this in a way that empowers you. They should also be able to answer questions about your account statements and tax-related documents, and communicate with beneficiaries. These are all part of their duties as Trustee.

Choosing a Trust Company

Choosing a trust company is an option that comes with a few pros and cons. A major advantage is that a corporate trustee cannot steal from the trust (although it may be able to mishandle the assets in an inefficient or unauthorized way). This is a significant consideration given the fact that, unlike family members, a professional trustee will be subject to liability and oversight by law enforcement and a forensic accounting firm, while a family member will not be.

In addition, the services offered by a trust company are often more cost effective than those provided by individual financial service providers. They can provide investment management, tax services and estate planning, all under one roof.

Finally, it is important to remember that, regardless of whom you choose, you should revisit your choices frequently as people and circumstances change over time. A good attorney will advise you of this and will help you determine the best options for your needs.

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