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Take Care: Choosing a Trustee

If you’re thinking about establishing a trust, you need to select a trustee—someone who is charged with administering the trust according to your wishes. Perhaps you’re considering naming a family member, or maybe you’re wondering whether it would be wiser to designate your attorney or another trusted professional. Choosing a trustee is an important decision that requires great care and an analysis of your unique circumstances.

A trustee’s role is to comply with the terms of the trust and fulfill its objectives. In selecting a trustee, you may want to weigh many personal, family, asset management, and business concerns. For instance, an important consideration is the size and complexity of the trust. Corporate and professional trustees often possess the accounting, tax planning, and money management experience necessary to administer large, complicated trusts. On the other hand, a small trust may not warrant professional management.

Duration is another significant concern. A trustee’s responsibilities often span one or more generations. Corporate fiduciaries may have the advantage of perpetual life (although the individuals administering the trust may change over time). This longevity may allow them to more easily fulfill the recordkeeping and reporting requirements of the supervising court, as well as Federal and state governments. If you’ve decided to appoint only individual trustees, you may want to consider designating co-trustees or successor trustees to address longevity concerns.

Corporate trustees have other advantages, as well. For instance, they may be more impartial when considering beneficiaries’ needs than family members, who may face conflicts of interest. Also, corporate and professional trustees are held to a higher standard of professional conduct than non-professionals. Of course, professional service comes with a price. Many grantors of small trusts choose non-professional trustees to avoid high corporate fees.

Benefits of Family Members

When a personal touch is needed, family members or other nonprofessionals who know the family may offer special advantages as trustees. They usually have the sensitivity and flexibility required to support the special needs of a beneficiary. A family member or business associate may also be the preferred choice if you’re leaving a business in trust, as corporate trustees generally do not run businesses.

Best of Both Worlds

Often, a combination of professional and non-professional trustees may work best. Corporate or professional trustees provide trust management expertise, while family members or other non-professionals respond to the changing needs and circumstances of beneficiaries.

Trusts are complex, varying by type and purpose, and are most likely to fulfill their objectives when responsibly administered. A trustee who is uninformed could mismanage a trust or take actions that could have serious tax consequences. A qualified legal professional can help you make the most appropriate choice for your particular situation.

Written and published by Liberty Publishing, Inc.

Posted on 1 September '11 by gedwards, under Estate Planning, Financial planning.