One of the most difficult decisions a person needs to make when setting up a trust is picking a trustee to administer the trust. While anybody over the age of 18 can serve as a trustee, that doesn’t mean that just anybody would necessarily be a good fit for the job. Serving as a trustee comes with a lot of difficult decisions and a great degree of responsibility, so anyone looking to set up a trust must carefully decide who is up to the monumental task of serving as trustee.
Because serving as a trustee is such a large responsibility, it is possible to appoint more than one trustee or to appoint an institutional trustee, sometimes called a professional trustee. An institutional trustee is an institution – usually a bank or trust company – with more experience and resources to administer the trust. An institutional trustee may be an especially wise choice in situations where the trust may run longer than any individual trustee’s lifetime, because the institution will remain as trustee as long as the trust and institution still exist.
The trustee is responsible for taking legal ownership over the trust assets and must always act in the best interests of the beneficiary. Some trusts are set up so that the trustee doesn’t have a lot of autonomy, while others require the trustee to make a significant number of decisions over how the assets should be distributed and used. The key word when picking a trustee is trust. The person setting up the trust must trust the trustee to act responsibly and in the best interest of all the beneficiaries. Below are some key considerations that should factor into the decision of who to appoint as trustee, but the list is non-exhaustive.
With the amount of time, energy, and effort it takes to serve as trustee. Trusts can take a long time to be fully administered, so the trustee must be aware of time frame of this commitment. Trusts can be challenging and complicated to administer. As such, it’s important that the designated trustee is aware of their role and is willing to serve as trustee. While many people are honored to be given such an integral role in another person’s life, others may not be willing to commit to a responsibility of that scope.
- Reliability and Integrity
It takes an incredible amount of integrity to be a good, competent, and honest trustee. A trustee is potentially holding and having access to significant assets and is deciding how they should be used in the beneficiaries’ best interests, with little to no compensation or credit. The fiduciary responsibility of serving as a trustee is significant, so it’s important to appoint someone who will carry out your wishes as you intend, sometimes even with pressure from beneficiaries to do otherwise. Your trustee must also be unbiased, organized, and able to make important decisions.
A rather practical consideration, it is important to consider a trustee’s age with respect to how long the trust is intended to be administered. If the trust is for a small child and is to be paid out until they’re 40, it’s unwise to pick a trustee who will not likely live another 40 years and look for someone with the longevity to carry out these duties. If you do want someone who is unlikely to survive beyond the life of the trust to serve as trustee, it’s important to appoint a contingent trustee.
Yet another practical consideration, the proximity or location of the trustee with respect to the assets and beneficiaries of the trust should be considered. For example, it would be difficult for a trustee in California to administer a trust involving a rental property in Texas, or for a trustee in Maine to understand the financial allocations that need to be made in the best interest of a Florida beneficiary. While distance certainly doesn’t preclude anyone from serving as trustee, it does make the role more difficult.
- Knowledge and Skills
Lastly, a good trustee must have the requisite knowledge and skills to carry out the monumental role. This involves knowledge of the person creating the trust, their intentions, and the beneficiaries who the trustee will be looking after and acting in the best interest of. Knowledge and skills of what the role entails, such as financial competence and organizational skills are also incredibly beneficial.
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