A trust can help protect your assets and assure that your estate is appropriately distributed to your family members. After you decide to create a trust as part of your estate planning, it is important to select a competent trustee.
Trustees have a duty to remain impartial between the interests of current and future beneficiaries, proper accounting of assets, and carefully investing funds. Self-dealing is also prohibited. Multiple trustees may be able to meet your needs.
When considering spouses and children for this appointment, you should consider their skills and determine whether they can act prudently and fulfill the trustee’ responsibilities. Consider whether the spouse or family member has the following qualities:
- Always exercising good judgment and separating their personal interests and feelings from those held by the beneficiaries
- Treating all parties impartially if your children are not your spouse’s children.
- Having the ability to analyze investments
- Avoiding the temptation of taking risks for a quick and substantial return at the risk and expense of other beneficiaries
- A spouse trustee acting responsibly after remarriage
- A child who is a trustee exercising good judgment when their sibling is a beneficiary
- Sons-in-law and daughters-in-law working amicably together
- A child having sufficient time to serve as a trustee with their family and career responsibilities
Financial and business advisor
Accountants, financial advisors, and lawyers may have a special and existing relationship with their clients and understand their business or financial goals. They must also understand, however, the trust associated with their duties and their responsibilities as a trustee. These professionals should have the following characteristics:
- Understand your family’s dynamics
- Sufficient experience
- Separate their personal financial interests from other clients’ interests
- The trustee has sufficient assets to satisfy a judgment in a professional malpractice action relating to any breach of duty
Bank or trust company
Banks and trust companies provide these type of services and act independently. Corporate trustees can use existing procedures and systems to appropriately manage funds. Their selection may reduce family conflicts. Corporate fiduciaries must comply with high standards.
Certain matters should be considered before appointing a bank or trust company as a trustee:
- The amount of trust assets spent on fees and unavailable to beneficiaries
- If increased investment returns provide value for the fees that were charged
- The bank or trust company understands your family or their needs
- Expectations from the administrator making decisions that directly impact your family or realizing the trust’s goals
An attorney can help you prepare a plan that meets your family needs. They can also provide options on protecting and distributing your assets.