CHOOSING A TRUSTEE: FAMILY, FRIEND, OR PROFESSIONAL?

admin - March 31, 2021 - Trust Administration
Choosing a Trustee

Trusts are legal entities into which you can transfer your property, accounts, and assets for the benefit of a living person. Many people establish trusts as an alternative to a Last Will and Testament. 

Two Types of Trusts

A revocable living trust is a trust you create and retain control over throughout your lifetime. A revocable living trust is flexible. It can be changed or even dissolved. You can remove beneficiaries, designate new ones, and change your instructions on how the trust assets are managed. Assets in a revocable living trust are not shielded from creditors. A revocable living trust becomes irrevocable upon your death. 

An irrevocable trust allows you to transfer your assets from your estate to the trust. Doing so may help avoid estate taxes and probate. However, you often cannot alter the trust once it has been executed without the beneficiaries’ consent (this is a very complex topic that gets into decanting and other nuanced rules – certainly something to discuss with your estate planning attorney). 

The Three Parties in a Trust

Grantor: The grantor is the individual who creates the trust, decides how it will operate, and determines which accounts and property are put into the trust. 

Trustee: The trustee is the person who will manage the trust, invest the funds or property in the trust, and distribute the assets to the beneficiaries as per the trust instructions. 

Beneficiary: The beneficiary is the person or persons who benefit from the trust. 

Choosing a Trustee

When you establish a trust, you need a trustee to manage it for you. The trustee will collect income, pay bills and taxes, save and invest resources for the future, distribute assets to your beneficiaries, and keep accurate records. 

Should you choose a family member or friend?

On day one, you will almost always be the trustee for your revocable living trust, and if you are married, you and your spouse will likely be co-trustees. Most married couples, especially ones who have been married for a long time, choose this option. If either of you becomes incapacitated or dies, the other can continue to manage the trust without interruption. You cannot be the trustee for most irrevocable trusts due to tax law restrictions. 

Consider your areas of expertise, time available, and investment skills as well as those of family members or friends who might be your trustee, co-trustee, or successor trustee. 

Should you choose a professional?

Professional or corporate trustees such as a bank trust department or a trust company can offer experience and investment skills that other choices may not. If you are elderly, widowed, in declining health, have no children or trusted friends nearby, or your potential trustee choices lack the time and ability to manage your trust, a professional may be a great option. 

If you do not have the time, experience, or resources to manage your trust, a professional could serve in that role. They could also manage irrevocable trusts for you. You should be aware that professional or corporate trustees will charge a fee to manage your trust. Usually, the fee is a great investment when you factor in their experience, services, and the investment returns you expect a professional trustee to deliver. Talk to several professional and corporate trustees to compare their investment returns, services, and fees. 

We can help you choose, educate and assist you and your successor trustee. Contact us today to start the process and gain the peace of mind that your investments are well protected for your loved ones. 

You can schedule a call with us or reach us directly at 855.356.0573 to learn more about how best to plan today to protect those most important to you.

 



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