Selecting Trustees

We’ve written on Epilawg before about the importance of choosing the right individuals for the various roles that need to be filled in your estate plan. In this post, I will focus specifically on choosing a trustee.

Background

To review, a trust agreement is a document that spells out the rules to be followed for property held in trust for beneficiaries. Common objectives for trusts are to reduce the estate tax liability, to protect property in your estate, and to avoid probate. A trustee is the person selected to manage and control the property in trust, while adhering to the trust agreement and always acting in good faith.

The primary activities of a trustee are: administration of the trust, investment of the funds in the trust and distribution of the funds to beneficiaries. As discussed in Maggie Green’s three-part series on a trustee’s duties, a trustee must:

• Be independent and impartial
• Follow the trust agreement
• Use care and act in good faith

Selection

Given all of the activities and duties, selecting an appropriate person for this role is crucial. In general, you should consider finding a person who has good judgment and is trustworthy. The selected trustee should be able to handle complex issues and, in general, have some sort of expertise in managing finances.

Another characteristic to consider is making sure the person you name to be trustee has not only the ability, but also the time to dedicate to being a trustee. Also consider the location of the trustee in relation to the trust assets and the beneficiaries.

Consider the relationship among all of the parties involved: do the trustee and beneficiaries get along? Finally, take into account the selected trustee’s willingness to remain impartial and to accept potential legal liability from disgruntled beneficiaries.

With all of these considerations and characteristics, you could choose a family member, a professional fiduciary or a trust company to be trustee.

Regardless of whom you choose, always keep in mind that the selection of a trustee should be a business decision, rather than an emotional one. Consult professionals before making this very important decision.