How to Choose the Right Trustee for Your Living Trust

When you create a living trust, one of the most crucial decisions you’ll make is choosing the right trustee. Your trustee will be responsible for managing and distributing your assets according to your wishes, so it’s essential to select someone you trust to carry out this important role.

Many people assume that naming a family member or close friend as a trustee is the obvious choice. While this can work well in some situations, it’s not always the best option. Choosing the wrong trustee can lead to mismanagement of the trust, conflicts among beneficiaries, and even legal disputes.

What Does a Trustee Do?

A trustee is a person or entity named in your trust document to manage and distribute the assets held in your trust according to your wishes. The trustee has a fiduciary duty to act in the best interests of the trust’s beneficiaries and must follow the terms of the trust document.

Trustee Responsibilities During Grantor’s Lifetime

If you have a revocable living trust, your trustee will work closely with you during your lifetime to ensure that the trust is properly administered. This may involve managing investments, keeping records, and filing tax returns. It’s crucial to choose a trustee who you can work well with and who understands your financial goals.

Types of Trustees

When selecting a trustee, you have two main options: an individual trustee or a corporate trustee.

Individual Trustees

An individual trustee is typically a family member or close friend whom you trust to manage your affairs. The main advantage of an individual trustee is that they are familiar with your family dynamics and can provide a personal touch. However, they may lack the financial and legal expertise necessary to effectively administer the trust, and there is always the potential for conflicts of interest.

Corporate Trustees

A corporate trustee is a bank, trust company, or professional fiduciary that specializes in trust administration. Corporate trustees bring a wealth of experience to the role and can provide objective, unbiased decision-making. They are held to high regulatory standards and carry insurance to protect against losses. However, corporate trustees may be more expensive than individual trustees and may lack the personal connection to your family.

Co-Trustees

Another option is to name co-trustees, which involves appointing both an individual and a corporate trustee. This can provide the “best of both worlds,” combining the personal touch of an individual trustee with the professional expertise of a corporate trustee. However, it’s essential to clearly define the roles and responsibilities of each co-trustee to avoid conflicts and ensure smooth trust administration.

Factors to Consider When Choosing a Trustee

Selecting the right trustee is a highly personal decision that depends on various factors unique to your situation. Here are some key considerations:

Trustworthiness and Alignment with Your Values

Your trustee should be someone you trust implicitly to carry out your wishes and act in the best interests of your beneficiaries. They should share your values and be committed to honoring your legacy.

Financial and Legal Acumen

Managing a trust requires a certain level of financial and legal knowledge. Your trustee should be competent in managing investments, keeping accurate records, and filing tax returns. Corporate trustees bring professional expertise to the table, which can be especially valuable for complex trusts or those with significant assets.

Availability and Willingness to Serve

Being a trustee is a significant responsibility that requires time and effort. Your trustee should be willing and able to devote the necessary time to properly administer your trust. They should also be available to communicate with beneficiaries and respond to their needs in a timely manner.

Impartiality and Lack of Conflicts of Interest

Your trustee must be able to make unbiased decisions that are in the best interests of all beneficiaries. They should be impartial and avoid any conflicts of interest that could compromise their ability to fulfill their fiduciary duties.

Naming a Successor Trustee

In addition to choosing an initial trustee, it’s important to name successor trustees who can step in if the original trustee is unable or unwilling to serve. This could happen due to death, incapacity, resignation, or removal.

Naming successor trustees helps ensure continuity in the management of your trust and avoids the need for court intervention.

Like your initial trustee, your successor trustees can be individuals, corporate trustees, or a combination of both. It’s a good idea to review and update your successor trustee designations periodically, especially if there are changes in your family circumstances or the availability of your named trustees.

Let Katz Law Firm, PLLC Set Up Your Trust for Success

Choosing the right trustee is one of the most important decisions you’ll make when creating a living trust. It’s not a decision to be taken lightly, as the wrong choice can lead to mismanagement, family conflicts, and even legal disputes.

At Katz Law Firm, PLLC, we’re dedicated to helping our clients create comprehensive estate plans that protect their assets and provide for their loved ones. If you’re considering establishing a living trust or have questions about choosing a trustee, we invite you to schedule a consultation with one of our knowledgeable attorneys.

Together, we can craft a plan that gives you peace of mind and ensures that your legacy is carried out according to your wishes.