When creating a trust, you have to select a person or institution to hold legal title to property and administer this property for the benefit of others. This person is known as the trustee. Trustee selection is an important step in the estate planning process because if the appropriate trustee is selected, he or she will ensure the successful administration of your trust.
The duties of a trustee are not similar to those of an executor. A trustee’s duty could carry on for generations, unlike the executor, whose duty might only last for one to two years. A trustee owes many duties and responsibilities to the beneficiaries of the trust, and thus the trustee may be liable if he or she puts his own interests before those of the beneficiaries.
Some of the basic requirements of a trustee include:
- Capacity – a trustee cannot be a minor, insane, or mentally incapacitated.
- Administration skills – a trustee must keep accurate records and file the appropriate tax returns. If the trustee does not have these skills, he or she must be able to engage a person who can advise and aid in the administration of the trust. Even with an advisor, the trustee has the final say in trust decisions and will be held accountable for those decisions.
- Communication skills – a trustee must be impartial and possess the discretion necessary to deal with delicate matters.
You may choose family members or professional trustees to administer your trust. Family members can be good trustees because they typically know the your wishes and often do not charge a fee to serve. The drawbacks to having a family member as a trustee include a lack of experience with record keeping and lack of knowledge of the tax consequences associated with a trust. Additionally, family members can sometimes find it hard to be impartial when making trust decisions.
Professional trustees, including banks, trust companies, accountants, and lawyers, are generally experienced when it comes to the efficient and accurate maintenance of a trust. They are also impartial when it comes to making decisions. However, professionals are compensated to administer the trust, and they often have no connection to the beneficiaries or possess any understanding about family situations, unless the trust creator provides this insight.
After deciding on a trustee, it is also important to select a successor. In the event of the death, incapacity, or resignation of the original trustee, a successor trustee will ensure the continued administration of your trust. And finally, if the duration of your trust is expected to be infinite, it may be prudent to name a bank or trust company to serve as successor trustee, since they will always be available to serve.
By: Hyman G. Darling, Esquire
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