Like many people, you may have put much thought into how best to protect your assets and preserve the value of your financial accomplishments for the benefit of your loved ones. When you establish a trust, someone has to administer and manage it – this article is about deciding who’s the best fit for this role and also who’s eligible to act as trustee based on the different types of trusts you may have.
Should you manage your own trust?
You probably manage your financial affairs. Just like a trustee, you collect income, pay and manage your bills, invest for the future, manage your properties, provide for your family, and keep records of your transactions. Perhaps you co-manage your household financial affairs with a spouse or partner. It would seem that managing a trust would be more of the same, but maybe it is not. Let’s take a look.
Can you be the trustee for your trust?
It depends on what kind of trust you have established. If it is a revocable living trust, then yes. You can be the trustee for your trust, and if you are married, you and your spouse can be co-trustees. A revocable living trust is commonly used to avoid probate, protect your loved one’s inheritances, and as a tool to plan in advance for when you can no longer manage your trust assets yourself. A revocable living trust, in most cases, can be modified or terminated. You can name a new trustee or co-trustee as needed.
If you have an irrevocable trust, then in most cases, you cannot be the trustee for your trust. An irrevocable living trust is typically one in which the terms cannot be modified or terminated without the beneficiaries’ permission. As the trust’s grantor or creator, you have transferred your assets into the trust, which means you no longer own them. Irrevocable trusts are commonly used to decrease your tax burden or for asset protection purposes. In most states, you cannot get these tax benefits if you are the trustee of the trust.
Who can be the trustee of your revocable living trust?
When choosing a trustee, you need someone who can stay impartial, provide accurate and complete record-keeping for the beneficiaries, invest the trust funds prudently, manage the trust properties and do so with honesty and integrity.
Besides serving as your own trustee, you may also choose:
- Your spouse
- An adult child
- A relative
- A trusted friend
- A professional
- A corporate trustee
What are the benefits of having a co-trustee?
When you have a co-trustee, if either you or your co-trustee becomes incapacitated or dies, the other can continue to manage and administer the trust without interruption. Your co-trustee or successor trustee could learn about your trust accounts and property and your beneficiaries now while you are still managing the trust with them. Having a co-trustee also gives you time to evaluate whether they are the best choice for trustee.
You may think that a co-trustee or having someone else serve as trustee means that you lose control of your trust assets. That is not the case. The trustee must follow the trust instructions that you provide and report their actions to you. You can replace the trustee if you feel they are not following your instructions.
What are the benefits of having a professional trustee?
There are many reasons you may not want to or be able to manage your trust. For example, you may be in poor health, like to travel and prefer not to pay attention to such financial matters, or lack family members to manage the trust. If you have an irrevocable trust, as mentioned above, you probably cannot be your own trustee, even if you wanted to do so. Choosing a professional trustee who has the experience, time, and resources to manage your trust may be a perfect solution. Like all professionals, a corporate trustee will charge you a fee to manage your trust. Usually, the fee is quite reasonable, and it may generate a significant return on your investment as you get professional advice on investing your assets. Compare the services, investment returns, and fees of many professional or corporate trustees to determine which is your best option.
We can help you consider your options for trustee and select, educate and advise your successor trustee. We can also help you review your trust agreement to ensure that the trustee’s role is clearly defined.