What You Need to Know About Trustees & a System to Choose the Right One

 1.  What Is a Trustee?

A trustee can be one or more persons, an attorney, or corporation that administers a trust according to the terms and condition stated in the trust document.

2.  Who Can Be a Trustee?

If the trust is a Revocable Living Trust, the person who created the trust is typically the trustee.  For example, if you created the trust for yourself, you’d be the trustee.  If the trust is a Beneficiary Controlled Irrevocable Asset Protection Trust for Bloodline Descendants, the trustee is typically a child of the parent that created the trust.  Not to worry too much about this.  Your lawyer will go over your options for trustees when you’re making the estate plan.  Here are some general comments about the categories of trustees:

a. Family or Friend Trustee.  You, your spouse, children, friend or someone else that you trust.  The benefit of this type of trustee is that they’re close to you, understand the family dynamics and the purpose of the trust.  Moreover, there will be minimal cost to administer it because you’re not likely to pay yourself to administer your own trust.  A disadvantage of this type of trustee is that the trustee may not be impartial and play favorites and cause conflict among the beneficiaries.

However, if the trust is a Beneficiary Controlled Irrevocable Asset Protection Trust for Bloodline Descendants, then that won’t be a problem because the trustee is also the beneficiary of the trust.  So it’s not likely that you’d fight with yourself.

b.  Attorney Trustee.  If you have a relationship with an attorney that you trust, then you get the benefit of an impartial administration of the trust and also legal expertise when it comes to making decisions about the administration of the trust. The disadvantage is cost.  An attorney will cost more than a family member or friend to administer the trust but less than a corporate trustee.

c.  Corporate Trustee.  A corporate trustee is less personal and may be more impartial when administering the trust, which may avoid conflicts among the trust beneficiaries. However, corporate trustees tend to be very expensive and you run the risk of the corporation administering the trust in the interest of the corporation instead of the interest of the trust beneficiaries.

3.  What Does a Trustee Do?

Generally, the trustee may have to manage insurance, bank accounts, investment accounts, retirement accounts, real estate and other valuable assets.  The trustee will also make decisions about how to distribute the income and principal of the trust to the beneficiaries. Therefore, an ideal trustee will have a background or some familiarity with these subjects. Generally, the trust states how it should be administered and it is the job of the trustee to administer the trust according to the terms and conditions of the trust document.

However, in some cases, trustees also may have some discretion when making decisions.  Therefore, it’s important to choose someone who understands your reason for setting up the trust.  So when the trustee has to make a discretionary decision, it more likely that the decision will be made consistent with your reason for setting up the trust.

4.  System for Choosing the Right Trustee

Now that you understand what a trustee is, who can be one, and what a trustee does, below is a system for choosing the best person.  Most importantly, you want to choose someone that you trust.  And it would be nice if that person has a background in law, insurance, federal and state tax, and experience working with the court system. If the person you considering doesn’t have that type of background, then at least he or she should be comfortable working with people like attorneys, investment advisors, tax accounts, insurance agents, and the court system.  Don’t sacrifice the good for the perfect. You’re not likely get everything that you want. However, there are several factors to consider, and I created the system below in an effort to help you make a good decision.  My system gives you three options but you can have more or less—it’s up to you.  Put the name of each person in the option category and rate them on a scale of 1 to 3 for each of the characteristics. One being the lowest, and three being the highest. Once you total the scores, the person with the highest score is the best person for the job.

Want Peace of Mind and a Complete Evaluation of Your Case? 

Call (610) 365-4986 NOW or Click HERE to Schedule a Consultation with Chester County Pennsylvania Estate Planning Attorney, Michaelangelo L. Dippolito.  Click HERE to see the attorney’s background. 

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• Optimal Estate Plan to Protect Your Life Savings and Family Relationships
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