Choosing a Trustee

What You Need to Know About Choosing a Trustee

When it comes to creating a trust as part of your estate plan, one of the most important decisions you’ll make is choosing a trustee. A trustee is the individual or institution responsible for managing and administering your trust according to the terms you’ve set out. This role comes with significant legal and fiduciary responsibilities, and selecting the right trustee is crucial to ensuring that your assets are managed and distributed according to your wishes.

Here’s everything you need to know about choosing a trustee for your trust.

What Is a Trustee?

A trustee is the person or entity responsible for managing the assets in a trust. Trustees are legally obligated to follow the instructions in the trust document and act in the best interests of the beneficiaries. The trustee’s duties include:

• Administering the trust: Managing and distributing assets according to the trust’s instructions.

• Fiduciary responsibility: Acting in the best interests of the beneficiaries and avoiding any conflicts of interest.

• Recordkeeping: Keeping detailed records of all transactions and decisions made on behalf of the trust.

• Tax filings: Ensuring that any taxes related to the trust are filed and paid on time.

Key Considerations When Choosing a Trustee

1. Trustworthiness and Integrity
    Since a trustee has significant control over the assets in a trust, trustworthiness is the most important quality to look for. The trustee should be someone you trust to act in your best interests, follow the terms of the trust, and protect your beneficiaries.

2. Experience and Knowledge
    Trustees should have a strong understanding of financial management, taxes, and the legal aspects of administering a trust. If you’re considering a family member or friend, be sure they are up to the task. Alternatively, you may want to hire a professional trustee, such as a bank or trust company, that has the expertise to manage the trust effectively.

3. Ability to Manage Complex Situations
    Trusts can be complicated, especially if they involve significant assets, multiple beneficiaries, or specific instructions. Choose someone who is capable of handling complexity and resolving any disputes that may arise between beneficiaries.

4. Availability and Commitment
    Managing a trust can be time-consuming. Your trustee should be someone who is committed to the role and has the time to devote to overseeing the administration of the trust. If you appoint someone who is too busy or unavailable, the management of the trust could suffer.

5. Geographical Location
    If your trust involves real estate or other assets that require physical oversight, it’s important to consider whether your chosen trustee is located near these assets or if it would be easier to hire a professional trustee located near the assets.

6. Cost of Professional Trustees
    While individual trustees may not charge fees, professional trustees (such as banks or trust companies) typically charge for their services. However, professional trustees often have the experience and resources necessary to handle complex trusts efficiently.