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Choosing a Trustee is one of the most critical decisions you will make when you create a trust. The Successor Trustee plays a vital role in managing and distributing the assets in your trust. Choosing the right person for the job ensures your trust will be handled properly. The attorneys at Wilcox Attorneys, PA encourage you to consider five questions when you make the choice.
How does a Trust work?
A trust is a legal arrangement in which you, as the Grantor, transfer ownership of assets to the trust. The Trustee manages the assets for the benefit of one or more beneficiaries. Trusts can be used for a variety of purposes, including: avoiding probate, reducing estate taxes, and ensuring assets are distributed according to your wishes. Typically you, as the Grantor, act as the Trustee, but you must choose a Successor Trustee to serve after you are unable to serve in that role.
What is the Trustee’s role?
The Trustee’s primary responsibility is managing the trust’s assets and following the trust’s terms. This can include:
- Managing Investments: The Trustee is responsible for managing and protecting the assets held within the trust. The Trustee’s goal is growing and preserving assets for the beneficiaries. Therefore, the Trustee must make investment decisions.
- Distributing Assets: The Trustee must distribute assets to the beneficiaries according to the instructions in the trust. This could include providing a regular income or distributing assets after certain conditions are met.
- Handling Taxes and Legal Obligations: The Trustee must ensure the trust complies with tax obligations and any legal requirements.
- Communicating with Beneficiaries: The Trustee must maintain clear and open communication with the beneficiaries, keeping them informed about the trust’s management.
Questions to Ask Yourself When Choosing a Trustee
Given the complexity of the role, it is essential to choose a Trustee wisely. To help you make the right decision, consider the following five questions when selecting your Trustee:
- Is the potential Trustee trustworthy? The most important quality in a Trustee is trustworthiness. A Successor Trustee is responsible for managing your assets and ensuring your wishes are carried out after your death. They will also need to communicate with your beneficiaries and handle potentially sensitive financial matters. You must be confident you choose a Trustee that will act in good faith and with the best interests of your beneficiaries in mind.
- Does the potential Trustee have financial experience? Managing a trust at times involves complex financial tasks such as investing assets, managing property, and filing taxes. While your Trustee does not need to be a financial expert, they should have some level of financial acumen. If they do not, they should be willing to seek professional guidance. It is best to choose a Trustee with experience in financial matters and/or a willingness to hire an advisor.
- Will the potential Trustee be impartial? Family dynamics can complicate the administration of a trust. A Trustee must act impartially and avoid favoring one beneficiary over another. If you are considering a family member or close friend as your Trustee, think about whether they can separate their personal feelings from their duties as a Trustee. If you think impartiality could be an issue, you may want to consider choosing a professional Trustee.
- Will the potential Trustee be available and willing to serve? Acting as a Trustee can be time-consuming. It could be a commitment to manage the trust over a long period of time. Ask yourself whether the person you are considering has the time and energy to take on this responsibility. Just because you name a Successor Trustee does not mean that person will agree to serve. Under some circumstances it may be best to ask the person ahead of time.
- Should you appoint a professional Trustee? If you have doubts about a family member or friend serving as Trustee, consider appointing a professional. Professional Trustees, such as trust companies or banks, bring expertise and experience to the role. They can offer impartial management of the trust while handling the Trust according to your wishes. While professional Trustees do charge a fee, the peace of mind they offer far outweighs the cost, especially in complex or large estates.
Do you have additional questions about choosing your Trustee?
For additional information, please join us for a FREE webinar. If you need assistance choosing your Trustee, contact the experienced Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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