Here’s how to choose a trustee that’s up to the important task at hand.
Choosing a trustee – the person or entity who’ll manage the assets within your trust – is no easy task. This important role comes with a number of responsibilities and liabilities, and it can be a challenge to find a loved one who’s able and willing to take on the task – which is one reason many investors use a corporate trustee.
Whichever type of trustee you choose – individual or corporate – you’ll want to keep a keen eye out for a few particular characteristics. Look for a trustee that fits the “three T’s” – time, temperament and tenure. Here’s why:
Managing a trust takes a notable time commitment. Your trustee will need the availability to manage a multitude of tasks and liabilities like disbursing income to beneficiaries, filing the trust’s income tax return, maintaining records of all transactions and countless more, so consider whether their current schedule allows for these additional responsibilities. Time also refers to their longer-term ability to hold this important position – will they still have the capacity and ability to serve as your trustee in years to come?
Your trustee needs to display the right degree of impartiality. Family dynamics can add an emotional layer of complexity to estate planning, and your trustee will need to make decisions without exhibiting bias or bending to external influence. In fact, your trustee has a legal duty to manage the trust in the best interests of both its current and future beneficiaries. They’ll be held liable for a number of duties such as ensuring all beneficiaries are informed of the trust and its administration, identifying conflicts of interest, and complying with all specific trust document provisions as well as state and federal governing laws. You’ll want to confirm that they both understand these responsibilities and can carry them out with professionalism.
Your trustee should have the knowledge, background and skillset to efficiently manage a trust account. Not every family member or friend will have experience with the financial and administrative responsibilities involved, which can include principal and income trust accounting, investing and tax reporting. Be sure your selected trustee is familiar with the tasks they’ll need to handle – and that you’re confident in their ability to complete them correctly and in a timely manner.
Selecting a trustee is an important decision – one that deserves thoughtful consideration. You may want to discuss your options with your financial advisor. As the coordinator of your financial team, they can help walk through the decision-making considerations involved – and may also be able to recommend an experienced, reputable corporate trustee, should you decide to use one.