How to Choose the Right Trustee
As both your assets and your family grow, your estate plan will also need to expand to accommodate that growth. One of the most popular estate planning tools to add at that point is a trust agreement. If you choose to incorporate a trust into your estate plan, you will need to choose a Trustee for your trust. Given the important role your Trustee will play during the administration of your trust, a Loveland trust attorney at Zimmer Law Office helps you choose the right Trustee for your trust.
What Is a Trust?
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts.
What Are the Duties and Responsibilities of a Trustee?
Although trust administration is something that is unique for every rust, the overall job of a Trustee is to manage and protect the trust assets and to administer the trust using the trust terms created by the Settlor. Typically, a Trustee will be required to invest trust assets using the “Prudent Investor Standard.” In essence, that means that the Trustee must be more careful with trust assets than he/she would be with his/her own assets. In addition, a Trustee must communicate with beneficiaries, distribute assets, keep detailed records, and ensure that any taxes owed by the trust are paid.
Choosing a Trustee for Your Trust
A common mistake people make when they create a living trust is appointing the wrong person as Trustee. They choose a Trustee based on familiarity instead of objective criteria. While a spouse, family member, or long-time friend might have your best interests at heart, that doesn’t mean he/she is capable of successfully administering your trust. To help you avoid choosing the wrong Trustee, you may wish to consider the following questions when considering a Trustee:
- Is the individual willing and able to serve? It’s amazing how often Settlers appoint someone to be their Trustee without discussing the appointment with them first. Before you seriously consider appointing someone, sit down with them and ask them I they are willing and able to serve. You may find that the individual has a conflict, doesn’t have the time to devote to serving, or simply isn’t interested in serving. If so, it’s much better to know that upfront instead of after you have already appointed them.
- Does the individual have any applicable experience or skills? A Trustee’s job involves investing trust assets and understanding the laws that apply to trust administration. Consequently, appointing someone with experience and/or skills in either field is wise.
- Will this person respect your wishes? Is this someone who will insist on injecting his/her opinion into things instead of respecting your wishes? Will he/she work diligently to fulfill your stated trust purpose, even if he/she doesn’t agree with the purpose? If the answer to either question is “no” then you should reconsider your choice.
- Would appointing this person create any conflicts? Ideally, your Trustee should not have any conflicts with the trust beneficiaries. If the Trustee already has a significant personal relationship with a beneficiary, this can often lead to a conflict of interest that can harm the trust because your Trustee should remain neutral.
- Is your potential Trustee good at conflict resolution? A conflict among the beneficiaries may arise at some point if there is more than one beneficiary. Having a Trustee who can resolve that conflict without the need for litigation is an excellent benefit to the trust.
Contact a Loveland Trust Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about choosing a Trustee for your trust, contact an experienced Loveland trust attorney at Zimmer Law Office by calling 513-721-1513 to schedule your appointment today.