Who Should Serve as Trustee of My Trust?

If those you have chosen as Trustee lack the ability or knowledge to implement your directions, then regardless of how well prepared your estate planning documents are, especially your trusts, your estate planning goals may fail.

The following are some things to think about when you choose a Trustee:

(1) Does your prospective Trustee have an inherent conflict of interest, or is he/she independent?

This type of conflict may arise in several different ways. Having a beneficial interest in the trust is one, and the prospective Trustee having a personal economic interest in the trust assets is another.

(2) Does your prospective Trustee possess adequate expertise to carry out your wishes?

A Trustee may, and often should, engage agents to assist them in the administration of a trust when the Trustee may be lacking in expertise in a certain area, e.g.,managing investments. However, the Trustee is ultimately responsible and should possess the abilities to exercise prudence in choosing the agent, establishing the scope of the delegation and having sufficient knowledge to understand and review the agent’s actions.

(3) Does your prospective Trustee possesses appropriate fiduciary capabilities?

Trustees must often make tough choices based on your directives. Whether a Trustee’s decision is right or wrong is rarely objectively certain. A Trustee’s decision may please one or more beneficiaries while causing distress to others. In order to be a successful Trustee, one must possess the judgment to make fair assessments and yet still be able to defend their decisions in the face of possible hostility, which may include litigation.

(4) Where does your prospective Trustee live?

While not required, having a Trustee in close geographical proximity to the beneficiaries tends to be more effective in conducting an efficient administration of your trust.

(5) Even if you regularly review your estate planning throughout the years, will the Trustee you’ve chosen likely survive you and be able to see the job through? Have you named an appropriate alternate?

Unless you are considering a corporate fiduciary, you should take into account the age and health of your Trustee and/or Successor Trustee.

(6) Should your Trustee be paid?

Trust administration is not free and cost is an important factor. Even if an individual Trustee is not compensated, he/she will likely need to hire third parties to render services in areas in which he/she lacks ability.

(7) How is your Trustee accountable?

If the inexperience or poor decisions caused by the Trustee result in losses to the Trust, can the beneficiaries be made whole? If a corporate fiduciary is serving or if an individual is bonded (which is very difficult and costly to obtain), then yes. Otherwise, the answer could likely be no.

Designating an appropriate initial and successor Trustee should be treated as one of the most critical elements in the estate planning process. The experienced estate planning attorneys at The Crosthwait Law Firm understand the risks, obligations, and requirements involved in estate planning and will skillfully guide you through the entire process.

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