Much of estate planning involves naming people, such as the beneficiaries of a will and financial accounts, the executor of the estate, powers of attorney and so on. If you wish to establish a trust as part of your plans, then you will also need to name a trustee.
To make the best decision on who that person should be, you first need to understand the duties and laws regarding this role.
What does a trustee do?
A trustee is the person responsible for administering the trust. Tasks include asset management, tax payments, bookkeeping and asset distribution. It involves a lot of paperwork, communication, research and decision-making.
Who should a trustee be?
Usually, the trustee is not the beneficiary of the trust to ensure financial protection from creditors and to prevent mismanagement. Only in a few cases may it be wise to make the beneficiary the trustee, too. Either way, the person must have a strong understanding of and experience in legal and financial matters, such as investments, taxes and accounting. Choose someone who is reliable, trustworthy and loyal.
The role lasts for a lifetime, as well, so consider the age, health, availability and other relevant circumstances of the person you want to appoint. You should also name a successor in the event of the trustee’s death. Make sure your choices are aware of and agree to their appointment, and be aware that they may no longer be willing or able to step up to the task when the time comes.
The trustee (or successor) does not have to be a single person; you can name a business, such as a bank or financial corporation, to act as trustee. Having a third-party trustee can be more beneficial than naming a family member or friend if you are concerned about personal objectives getting in the way of doing what is in the best interest of the trust and its beneficiaries. Just know that it comes with an expensive bill.