How do you choose a trustee to manage your estate after you pass away? Depending on the type of trust you’re creating, the trustee will be in charge of overseeing your assets and the assets of your family. It’s common for people to choose either a friend or family member, a professional trustee, or a trust company or corporate trustee for this critical role.
Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.
If you go with a family member or friend, she should be financially savvy and good with money. You want someone who knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor. However, financial advisors can be found to help, but there is no substitute for honesty. Could you hand that person a check for $10,000 and lose no sleep about how they would use it?
A good thing about selecting a friend or family member when you choose a trustee is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics. Family members also usually don’t charge a trustee fee (although they are entitled to do so).
However, your family may be better off with a professional trustee or trust company that has expertise with trust administration. This may eliminate some potential hard feelings in the family. Another negative is that your family member may be too close to the family and may get caught up in the drama. They may also have a power trip and like having total control of your beneficiary’s finances.
The advantage of an attorney serving as a trustee is that they have familiarity with your family if you’ve worked together for some time. However, there will be a charge for their time spent serving as trustee.
Trust companies will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company when the beneficiaries don’t get along, when there is a problem beneficiary, or when there is a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions, if it will reduce the assets under management that they’re investing. You can solve this potential problem by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee.
At our meetings with clients, the sorting out of trustee candidates is a significant focus. Talk to your estate planning attorney and go through your concerns to find a solution that works for you and your family.
Reference: Forbes (May 31, 2019) “How To Choose A Trustee”
Suggested Key Terms: Estate Planning Lawyer, Trusts, Trustee, Asset Protection, Inheritance, Beneficiary Designations