Picking the Right Trustee
What does a trustee do?
Your trustee is the manager of your trust. For most trusts, the grantor (you) would be the trustee and only upon your death/incapacity would the successor trustee step in your shoes.
The trustee has many powers, but generally speaking a trustee is responsible for:
How much and when people get money from the trust
Permitted investments for the trust
Protecting trust assets from bad people or unfortunate circumstances
So how do you go about choosing the right trustee?
For simple trusts (e.g., family trusts)…
For simple trusts or trusts that are intended to terminate upon the death of the grantor or surviving spouse, it is common for clients to pick their siblings, adult children, or other family members (e.g., an adult niece or nephew) as the trustee or manager of the trust assets.
When there doesn’t seem to be a good choice among family members, your next best bet is close friends - ideally, a person younger than you that you have known for many years and understands your family dynamic.
For complex trusts…
Things get complicated when you are dealing with irrevocable trusts, trusts managing millions of dollars, or a trust that you intend to continue to remain in place long after you are gone (for example, if you have a trust set up for a child with substance abuse issues).
In those scenarios, you could still rely on a family member or close friend, but generally the more money and the more time the trust is in existence, the more likely you are to have a family conflict. In such scenarios, it may be in your best interest to get a professional trustee involved - preferably one that has a lot of experience and proper insurance to give you complete peace of mind.
In such scenarios, where a professional trustee is chosen, you may choose to have a family member (perhaps even a beneficiary) act as co-trustee to maintain the right balance.
Different types of professional trustees.
If you go the professional trustee route then you generally have two options: (1) corporate trustee - such as a bank trust department or trust company or (2) an attorney or law firm.
For shorter term trusts, a competent attorney may work great as a professional trustee, but there is always the possibility that he or she will predecease you, become incapacitated, or (in many cases) retire. More often than not, you’ll see professional trustees used for the standard irrevocable trusts, like life insurance trusts. I would only go the attorney route if you actually like the person and your family has good rapport with them. That may seem obvious, but I’ve seen many scenarios where a client just picked their drafting attorney without giving much thought to the fact that they’d be dealing with them for years after. This usually results in a resignation or (at best) quiet discontent among the beneficiaries.
For longer term and more complex irrevocable trusts, the corporate trustee is the way to go because it provides continuity, experience, and generally more resources to handle a variety of situations that are impractical for an individual trustee to take on. When working with a corporate trustee you are generally going to get less personal service and the fees will be higher, so I typically only see a corporate trustee done as a last resort.
In summary, when deciding who to serve as trustee, the thought process typically goes like this:
You (if permitted)
Spouse
Parent (if young and you plan to update your trust in 5-10 years)
Sibling
Adult Child(ren)
Cousin
Adult Niece/Nephew
Friend
Personal Attorney/Accountant/Advisor
Bank/Trust Company
One last word of advice - don’t overthink it or get caught up in analysis paralysis. The worst thing you can do is never get the trust done because you couldn’t decide on the perfect trustee.
Interested in setting up your own trust or have any other estate planning questions? Give me a call at 781 202 6368 or email me at jlento@perennialtrust.com to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
Perennial Estate Planning
477 Main Street
Stoneham, MA 02180
