So you’ve finally made the decision to move forward with your estate plan and now you need to choose a trustee who will act on behalf of your heirs’ best interests. It can be a difficult choice, but there are a few notable factors in choosing the proper one that can make the process easier.
Some people begin by considering a family member or a close friend, but did you know there’s also the option to select a professional trustee such as an accountant, lawyer, trust company or corporate trustee?
A couple of notable things to keep in mind when making your decision to choose a trustee can ease the burden of choice.
A trustee’s duties include paying bills, making proper investments, keeping accounts and preparing tax returns. Therefore, a very close friend with their own unsteady financial problems may not be a good choice. Look for trustees among the financially astute, someone who is good with money; someone who is familiar with the basic concepts of investing is something to keep in mind.
Familiarity with your family dynamics
The people closest to you such as family members or dear friends that understand your family’s dynamics could be beneficial. Family members probably won’t charge a trustee fee, although they are entitled to it. So, if you’re looking to cut costs you may go this route.
Professionals have expertise in trust administration and with that knowledge comes a price. A lawyer or accountant that is not within your family is more likely to treat everyone equally. Maybe consider a lawyer or accountant who’s been working with your family for a long time if you have one. They may bill for less than a trust company or a corporate trustee.
Professionals such as these are good at making difficult decisions and telling beneficiaries “no” when appropriate. If your heirs don’t get along and there are large sums of money involved, it might be worth the fee of a professional trustee. If you feel uneasy, you can give a family member or friend the power to remove and replace a corporate trustee.
There is also the option of a co-trustee arrangement where two entities manage your trust. For example; a sibling and a professional trust company. The professional can handle the technical work while the sibling has family knowledge. It’s just another option to consider if you feel uncomfortable appointing just one trustee.
Here are a few characteristics to keep in mind when choosing a trustee option.
Traditional Corporate Trustee
- Rigid Policies
- Changing Personnel
- Sensitive and knowledgeable about family
- Flexible/Subjective – saying “no” is difficult
- Not Permanent
- Individual Fiduciary Liability
- Family Dynamics
Private Family Trust Company
- Permanent Trustee Solution
- Institutionalize the personal, business & investment matters for a family
- Personalized Service
- Liability Protection
- Flexibility in Managing Concentrated Positions
Depending on your values, one of these options could be the best one for you.
Whatever you choose, take into consideration that your trustee will likely be managing your trust for an extended time. Therefore, you’ll want someone you think will be around for a long while and has time to really devote to their trustee duties.
Don’t let the decision of who you should appoint your trustee prevent you from finalizing and signing your estate planning documents. Call around and speak to different trusted advisors, such as Chuck Bendig, to discuss your concerns and they can be worked through until you find the best solution for you and your family. You have the option to reevaluate your choice every few years.