How do I Choose a Trustee?
The majority of estate plans these days incorporate a trust in one way or another. One of the biggest decisions clients make is choosing a trustee to serve once they have passed away. The two most common options are a trusted family or friend, or a professional such as a bank or attorney. The trustee’s duty is to manage the assets according to the terms of the trust and to the best of his knowledge, to uphold the client’s intentions. The trustee must do so without regard to his own opinions or feelings. Many client struggle with such a heavy decision.
The best way to answer “how do I choose a trustee” is to ask the following questions:
- Does this trustee understand my family values?
- Does this trustee have an understanding of managing assets and investments?
- Does this trustee have the time to handle the additional work?
- Is the trustee logistically able to handle the assets (i.e. is he active military? is he too far away from the banking institution)
The positives to having a professional, such as a bank or an attorney act as trustee is that they will be held to a higher standard of care. They are knowledgable in how to act as trustee, and they are impartial. In addition, a bank is likely to “outlive” the life of the trust. The downside to having a professional act as trustee is that they charge for their services, and many times these fees are hefty.
The positives to having a family member or friend act as trustee is that you have a personal relationship with them. It is assumed that they understand your intentions and your family dynamics. Family members or friends are also much less expensive than professional trustees. The negatives are that family members or friends are not always well versed in managing investments and assets. Family members or friends may also have a harding time separating their feelings from their duties. They may have a harder time making tough decisions.
There is no black and white answer to this question, and there is never a right or wrong answer. Every situation is different and only the client can make this decision for himself.