OC Elder Law
Appointing The Right Trustee
One of the most important questions answered by the estate planning process is how to distribute your assets once you are gone. This is commonly done by having an estate planning attorney draw up a trust that holds your assets for the benefit of your beneficiaries. A trustee must be named to manage these assets, and selecting the right one is of the utmost importance.
Put simply, a trustee is the individual, corporation, or board who holds legal title to the assets placed in trust. They approve or deny each request made by a beneficiary, and write a check whenever the use of trust funds is approved. The trustee is also responsible for managing the assets in the trust, keeping accurate tabs on income, expenses, assets, and liabilities as needed.
It’s a very important job, so there are some legal restrictions on who may take it on. A trustee must be at least 18 years of age and capable of managing their own financial affairs. Almost everyone meets this minimum requirement, but you should look for more when naming a trustee.
The Traits to Look For in a Trustee
The most important thing is for the trustee to be trustworthy enough to act in accordance with your wishes for the benefit of the beneficiaries. You are handing your trustee the keys to a vault filled with valuable assets, so anybody who may abuse the position cannot be considered.
Next, your trustee needs personal experience managing the types of assets in your trust. Estate tax returns will be an issue if the trust is funded at your death, so experience with those is a plus. Likewise, Special Needs Trusts should be managed by somebody with an intimate knowledge of federal benefit programs.
A good trustee must also be organized. There is a lot of record keeping associated with trusts, including a thorough listing of all income, liabilities, assets, and expenses. These are subject to governmental review, making mistakes a potentially disastrous proposition.
The role of trustee may last for decades, making a healthy person capable of doing it for a long time the ideal candidate.
Finally, prudence is demanded of any good trustee. They are responsible for the investment decisions that drive the value of the estate, so a detail-oriented, rational thinker needs to be at the helm.
Personal or Professional?
Although your estate planning lawyer can help you form the trust, choosing the trustee is really a decision that should be made by you and your closest group of supporters. Many individuals choose a family friend to act as trustee, citing their familiarity with the family’s needs as an advantage over a professional service. Trustworthiness may also be less of an issue with somebody you know. However, this arrangement is likely to fundamentally alter the relationship between the family friend and the beneficiaries. The trustee may also allow attachment to the beneficiaries to guide their choices, acting in a manner that is not really in the beneficiary’s best interest.
A professional trustee is more likely to have the time and expertise required to manage the trust properly. They are also less likely to allow personal attachment to influence their decisions, saying “no” when needed. However, they may not have the same understanding of your wishes and needs a trusted friend does. Some opt to appoint a personal trustee and hire a professional one to act in concert for the best of both worlds.
If you have more than one beneficiary for your trust, it pays to explain your wishes to your trustee(s) and beneficiaries before you pass on so that there are no surprises later. It may seem awkward in the moment, but really serves to maintain family harmony once funds get disbursed.
You can also change your trustee at will if your trust allows it. Otherwise, you may file a legal motion to make a change. Poor investment decisions, excessive fees, and distributions may all be adequate grounds to make a change.
Our estate planning attorneys in Corona, Fullerton, and Newport Beach know that choosing a trustee isn’t an easy process, but we hope that the tips above will make it easier for you to choose.