** This article has been revised from its original version which was published on February…
A trustee serves a very important role in the care and control over the trust estate; therefore, the person or entity you choose to be your trustee is very important.
A trustee holds legal title to the trust’s assets and has a fiduciary responsibility to the beneficiaries of the trust. In general, a trustee is responsible for maintaining the books and records of the trust, accounting to the trust beneficiaries, managing the trust assets, communicating with the trust beneficiaries, filing fiduciary income tax returns, and administering and distributing the trust estate in accordance with the terms of the trust.
Ideally, you want to select a person or entity that has experience with the trust administration process, investments of trust assets, and distribution of trust assets; however, we understand that not everyone has such experience.
First and foremost, when selecting a trustee, it is crucial to select a person or entity that you trust to administer the trust estate.
Next, you should consider whether or not you want to select a family member or friend, trusted advisor, or corporate fiduciary to be your trustee.
When selecting a family member or friend to be your trustee, it is important to consider the following:
- Does the prospective trustee have a good relationship with the trust beneficiaries?
- Does the prospective trustee have the time to devote to the trust administration?
- Can the prospective trustee separate his or her personal interests from those of the trust beneficiaries?
Some people prefer to have their trustee be their attorney, accountant, or other trusted advisor because these trusted advisors have experience in administering trusts and understand your personal goals and family dynamic. When selecting a trusted advisor to be your trustee, it is important to consider the following:
- What are the trusted advisor’s fees for administering the trust?
- Will the trusted advisor be compensated for providing legal advice, tax advice, or financial advice to the trust in addition to their trustee commission?
- Will your trusted advisor be able to communicate with the trust beneficiaries and understand their individual needs?
Other people prefer to utilize a professional fiduciary to administer their trust. A professional fiduciary are banks or trust companies that have systems and procedures set in place to manage the trust property, invest the trust assets, and ultimately distribute the trust estate. However, it is important to consider the following when considering a corporate fiduciary:
- Will the corporate fiduciary understand your family dynamic and be able to communicate with the trust beneficiaries to understand their individual needs?
- What are the corporate fiduciaries fees for administering the trust?
In summary, your trustee should be a person or entity that you trust to manage the trust assets, understand the needs of the trust’s beneficiaries, will keep diligent records of trust transactions, and administer and distribute the trust in accordance with the terms of the trust.