But whichever kind you choose, you’ll have to select a trustee to oversee your and your loved ones’ assets. Understandably, this important decision may give you pause. You need someone who will act in your heirs’ best interests.
Many people start by considering a family member or very close friend. However, another option is to select a professional trustee — a lawyer or accountant, trust company or corporate trustee. What factors should you be mulling over in choosing a trustee?
A dear friend whose own financial situation is shaky probably isn’t a good choice. A trustee’s duties include making proper investments, paying bills, keeping accounts and preparing tax returns. Look for trustees among the financially astute — those who are good with money. They are familiar with the basic concepts of investing and may have been investing their own money with investment advisers.
Familiarity with your family dynamics
Your friends and family members are closest to you and your family and understand your family’s dynamics. Family members probably won’t charge a trustee fee, though they are entitled to it, so if you’re cost conscious, you may wish to go this route. However, family members may be too close to the family and get caught up in family drama, so keep your particular extended family dynamic in mind.
Professionals have expertise in trust administration and with that expertise comes a fee. Someone with a little more distance may see the whole picture in a different light, treating everyone equally. Consider a lawyer or accountant who has been working with your family for a long time, who may bill for less than a trust company or corporate trustee. They may bill by the hour, while other institutions charge a percentage of the trust.
Professionals may be good at making tough decisions, telling beneficiaries “no” when appropriate. If your heirs don’t get along and there are large sums of money involved, the fees of a trust company may be money well spent. On the other hand, a trust company may be hard to remove or become inflexible, even being tightfisted in distributions because payouts reduce the assets under their management. One possibility may be giving a family member or friend the power to remove and replace a corporate trustee.
Another option is a co-trustee arrangement, in which the trust is managed by two entities — a sibling and a professional trust company, for example. The professional can handle a lot of the technical work, while the sibling has family knowledge.
Whatever you choose, keep in mind that your trustee will likely be managing your trust for an extended time. Therefore, you’ll want someone, or some firm, you think will be around a long while and has time to devote to trustee duties.
For now, the decision about who your trustee should be shouldn’t stop you from finalizing and signing your estate planning documents. You can discuss your concerns with your trusted advisers so they can be worked through until you find a solution that works for you and your family. You can reevaluate your choice every few years, too.
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