What Do I Look for in a Trustee?

If you decide to leave assets in a trust for your beneficiaries, consider your designation of trustee carefully. The most important person in the trust framework is the trustee, the one responsible for managing trust assets.

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Estate planning is a critical part of the retirement planning process. As we kick off the new year, this is a perfect time to ensure that your plan is up to date.
Things change over time. That includes our lives, our family, and even the laws that apply to estates. This means the wills, trusts, and other estate documents that protect our families and secure our legacies may need to change, too.
With that in mind, we’re thrilled to have Keith McManus, attorney at McManus Estate Planning, back on the podcast. In our conversation, we discussed the downside of not reviewing and updating your estate plan, different ways to protect your biggest asset such as the family home, and the pros and cons of life estates and much more.
In this podcast discussion, you’ll learn: 
  • Reasons why a “set it and forget it” strategy can put your estate at risk.
  • How to take advantage of incredible opportunities before the Tax Cuts and Jobs Act sunsets in 2025.
  • Why you may want to prepare estate plans to protect young adult children, even if they haven’t accumulated much wealth yet.
  • What it means to create a life estate–and the potential risks and benefits of this approach to retirement.
  • Why there’s no such thing as a cure-all trust–and how this makes estate planning more important than ever.
  • Why you never want to rely on a will as the backbone of your estate plan.

The trustee is legally obligated to carry out the terms of a trust.? Because trusts can be complex and involve tax advantages, often the best choice is a professional.? Trustees have fiduciary obligations and are tasked with caring for the assets in the trust for one or more beneficiaries.

It is the trustee who handles all the necessary paperwork and sees that tax returns are filed.

FedWeek?s recent article entitled ?Your Options for Selecting a Trustee? explains that probate and trust law creates a fiduciary responsibility, so the trustee is accountable to the trust beneficiaries and must serve the beneficiaries? best interests. Here are the types? one can select:

Individual: a common choice is to select family members, children or friends.? None of these will qualify as independent or disinterested, so bear in mind that if your trust is designed for asset protection, having an interested or vested fiduciary will weaken the asset protection value of the trust.? That said, friends, children and relatives are the most familiar with everyone involved and may well make the decisions desired by you, the trust creator.? Unfortunately, naming a friend or family member also carries a risk that the person is unfamiliar with trusts and the technical requirements of actually carrying out their duties.? If you decide to go with an individual, make sure you choose someone who is trustworthy. It?s the most important qualification. Ask yourself if this a is person who can be counted on to carry out the terms of the trust unconditionally when I?m gone. You also need to be certain that your selection is financially responsible and understands how to administer the documents. The reason is that their duties will include handling financial accounts and being responsible for taxes and investments. A trustee needs to deal with financial accounts, as well as the responsibility of accounting to the trust beneficiaries regarding all assets, income and expenses of a trust. Therefore, basic record keeping skills are required. Finally, you need someone who?s available. Choose a trustee who?s likely to be available when the need for his or her services arises. Age, health, job demands and location are all things to take into account, when selecting a trustee.

Institution or Entity: law firms, CPA firms, local banks and trust companies are technically saavy and used to handling trusts.? They are often the best selection.? Further, if your trust is intended for asset protection, then these institutions may qualify as independent, disinterested and neutral.? These qualities will bolster claims that your Trust has asset protection value.? They also will have the staying power to handle long-term trusts.

You can also set up a combination of the two. You could designate an institution and an individual as co-trustees. That way, you may get financial expertise and personal attention. If discretionary decisions are permitted, you can leave instructions that both co-trustees must agree.

You can also add ?removal? powers into the terms of the trust to reduce the risk that a fiduciary will prove to be unsatisfactory. A majority vote of adult income beneficiaries may be enough to get a new trustee. That person must be an unrelated person or institution.

When you name an individual as trustee or co-trustee, again make certain that he or she is qualified to do the job, then get his or her consent.

You should also designate a successor trustee, just in case your first choice is unable or unwilling to serve.? Contact the offices of McManus Estate Planning LLC if you would like more information about selecting appropriate fiduciaries or if you would like options to consider for professionals that serve in this role.

Reference: FedWeek (Aug. 13, 2020) ?Your Options for Selecting a Trustee?