Gregory S. DuPont
Trustees and Your Living Trust—Making the Right Choices
If you are thinking about establishing a living trust, you will need to give considerable thought to selecting a trustee. Perhaps you are thinking about naming a family member. Or, you may be wondering whether it would be wiser to designate your attorney or another trusted professional. As the trust’s grantor, you should choose a trustee with care. Here is some information on the role of a trustee and the benefits and tradeoffs of the different choices available to you.
A trustee is a person or institution selected to administer a trust. A trustee’s role is to comply with the terms of the trust and to fulfill its objectives. In selecting a trustee, you must weigh many personal, family, asset management, and business concerns. The nature and purpose of a living trust—the fact that it will be in effect during your lifetime and that it is created so you can maintain control over your assets—make you and/or your spouse ideal candidates for being named trustees.
Trusts that are complex and require a great deal of asset management may require additional professional experience. Some individuals may elect to name a trusted professional as co-trustee. At the same time, it may be just as prudent to have a professional’s services written directly into the trust document. That way, should the need arise in the future, the document can be amended to coincide with your changing goals and objectives. Either way, the choice is yours and will depend entirely on your own comfort level.
Naming Successor Trustees
Generally, a living trust is written to benefit you (and your spouse). Upon your death (and your spouse’s death), the trust may continue, if it is your desire, for the benefit of named contingent beneficiaries (such as your children). In doing so, your wishes for asset management can continue well into the future, to the extent of the provisions of the trust. However, your wishes cannot be carried out unless your trust names a successor trustee(s).
Choosing a successor trustee is similar to choosing an executor of a will in that you are placing a great deal of trust and administrative responsibility in an individual(s) when you will not be present. Naturally, anyone you select will be bound by his or her fiduciary responsibilities to carry out your wishes. However, being a trustee requires more than the ability to follow instructions. It requires sound judgment and an understanding of your original goals and objectives. In addition, it often requires a great deal of compassion, especially when extraordinary circumstances exist (e.g., handling a family-owned business or care for a special needs child). Therefore, you should take great care when selecting successor trustees.
If you have grown children, one or all of them may make excellent candidates. However, you need to evaluate the personal skills and personality of each individual to make the most prudent choice. If your children are still young, or you can honestly say that you do not feel particularly confident in the abilities of any of your grown children to serve as trustee in the future, a close relative or family friend may suffice. In addition, you should also consider a trusted financial or legal professional as a possible candidate. Again, a professional’s services can also be written into the document.
Selecting a trustee is not as simple as it may first appear. There are a number of factors that need to be reviewed before the best possible choice (or choices) can be made. Bear in mind that trusts are legal documents that need to be written by an attorney. In addition, an inappropriately chosen trustee may not adhere to your wishes, possibly resulting in the invalidation of the trust or undesirable tax consequences. Therefore, it is best to consult a qualified legal professional to help ensure your planning decisions are consistent with your current and long-term objectives.