One of the purposes of a trust is to provide peace of mind. This includes assurance that someone competent, qualified, and committed is looking out for your interests and those of your beneficiaries.
Choosing the right trustee is where your piece of mind starts. A trustee is the person or organization that you’ve charged with managing the assets in your trust. While you are alive and alert, you are your own trustee. When you become incapacitated or when you pass, your successor Trustee becomes the one who manages your trust assets and who is responsible for distributing them according to the trust’s provisions.
Below, you’ll find five traits that make for a good trustee. When thinking about who to choose for this role, consider people who have all of these traits whenever possible.
1. Strong Analytical and Problem-Solving Abilities
Ideally, your estate planning attorney created a trust that is thorough and easy to administer. If this is the case, your trustee need simply to carry out the provisions of the trust as directed by the trust. However, this doesn’t mean the trustee never has to solve problems or make difficult decisions.
No one has a crystal ball. Conflicts and conundrums may come up that you didn’t specifically define in the trust, and when this happens your trustee is tasked with understanding the spirit of your wishes, the letter of the law, and the interest of the beneficiaries in order to make appropriate context-specific decisions.
In these situations, your estate will be best served by a trustee that can do some research, understand complex matters, and who isn’t afraid to reach out to others for advice as needed. Choose a trustee who fits this description. Avoid choosing a trustee you feel may balk at making decisions or becomes anxious when faced with difficult choices.
2. Exquisite Money Management
One of the main responsibilities of a trustee is to manage the assets in the trust to serve best interests of the beneficiaries and in accordance with the trust’s provisions. That may involve making and managing investments, reviewing expense requests and distributing funds, handling tax returns, and even paying bills.
While your trustee has the authority to use trust assets to hire lawyers and CPAs to assist with some of the more technical financial work involved, your trustee should have some instinctual financial savvy and competence. Someone who is bad with money or generally irresponsible isn’t the best choice as Trustee.
3. Ability to Keep Records and Report to Others
Trustees must keep impeccable records and may need to report information about the trust to others, including beneficiaries, business stakeholders, or government entities like the IRS. Choose a trustee who is organized and reliable. Ideally, your trustee is also comfortable with computers and online services and transactions, as financial management and reporting is increasingly done online now.
4. Time and Willingness to Commit
Availability–now and in the future–is a huge consideration when choosing a potential trustee. While it is best to pick trustees that you believe could step into their role at any time, you also want to plan for the future. If your first successor trustee is your peer, you may want to choose a younger trustee as your second successor trustee.
Choose a trustee who can handle adding this responsibility to their life. For instance, a sibling struggling to care for three children or a friend who has his hands full with a small business may not be your best options. Being a trustee is a job. Make sure that your choices are able to show up without upending their own lives.
*If being a trustee is a job, should you compensate my trustee? Good Question! It depends. Ask us!
Trustees enter into what’s called a fiduciary relationship. They are legally responsible for handling the assets of the trust in a way that honors the trust provisions and cares for the interests of beneficiaries. While there are many legal boundaries to help ensure trustees follow through on that trust, there have been cases where trustees defrauded/stole from beneficiaries or simply mismanaged assets irresponsibly and depleted trust assets through negligence.
The best way to avoid these potential issues is to choose a trustworthy person or organization to manage your trust. When choosing an individual, consider your relationship with them and how much you trust them. You should also consider their personal situation and whether they have any pressures, such as debts, addictions, or other issues that might lead them to make untrustworthy decisions.
Often, trustee(s) are family members, but they don’t have to be. Valued friends, financial planners (and similar professionals,) and experienced estate lawyers also often act as trustees. If you decide to honor a professional with a trustee appointment, read reviews and talk to others about their experience with these candidates. Choose a professional with a successful track record as a trustee.
Work With Craig Associates P.C. to Set Up Your Trust
While these general guidelines are a good place to start, it’s best to talk to your estate planning lawyer about trustee designations during the process of creating your trust. Reach out to Craig Associates, PC, today to learn more about how we can help.