What should I consider when selecting a Trustee?
One of the most important, and sometimes most difficult, decisions to make is selecting a Trustee of your trust. Normally, while you are alive and competent, you will be the Trustee of your revocable living trust; however, if you become incapacitated or pass away, the successor Trustee you've named will step in and take over the management. Therefore, selecting a Trustee who you trust to be financially responsible but who also can manage a professional relationship with your beneficiaries is important.
Selecting a Trustee requires that you consider whether the person or entity you select will understand the needs of your beneficiaries. For example, if you have young children, you may want to select a responsible Trustee who has some understanding of the financial resources required to care for a minor. If the bulk of your assets is comprised of a small or closely-held business, you may want to select a Trustee who can respond to the needs of the business and determine the best course of action so as to maximize the value of your trust for your beneficiaries. Regardless of who is selected, it is a given that the Trustee must exercise fiscal responsibility or have enough sense to known that he or she needs to retain appropriate counsel to advise him on those types of decisions.
When it comes to selecting Trustees, many select one of the following types of individuals:
- Family or Friend that the Trustor knows to be responsible
- A professional such as an Accountant or Lawyer that the Trustor has a relationship with
- Professional Fiduciaries such as banks/corporate entities that specialize in serving as Trustees
Each type of Trustee has pros and cons with the trade-off usually being skill/expertise versus cost. That being said, just because a family member or a friend is selected does not mean that he or she will perform less well than a professional fiduciary. In some cases, family and friends may be better where the assets are relatively low in value and the need for personal relationships is great.