Select Trustees with Care

If you are thinking about establishing a trust, you will need to select a trustee—someone who will administer the trust according to your wishes. Perhaps you are considering naming a family member, or maybe you are wondering whether it would be wiser to designate your attorney or another trusted professional.

Choosing a trustee is an important decision that should be made with care. A trustee’s role is to comply with the terms of the trust and fulfill its objectives. In selecting a trustee, you must weigh many personal, family, asset management, and business concerns.

For instance, an important consideration is the size and complexity of the trust. Corporate and professional trustees often possess the accounting, tax planning, and money management experience necessary to administer large, complicated trusts. On the other hand, a small trust may not warrant professional management. Duration is another significant concern. A trustee’s responsibilities often span one or more generations.

Corporate fiduciaries may have the advantage of perpetual life (although the individuals administering the trust may change over the years). This longevity may also allow them to more easily fulfill the recordkeeping and reporting requirements of the supervising court, as well as Federal and state governments. If you have decided to appoint only individual trustees, you should be advised to consider designating co-trustees or successor trustees to address longevity concerns.

Advantages of Professional Trustees

Corporate trustees have other advantages, as well. For instance, they may be more impartial when considering beneficiaries’ needs than family members, who may face conflicts of interest. Also, corporate and professional trustees are held to a higher standard of professional conduct than nonprofessionals.

Of course, professional service comes with a price. Many grantors of small trusts choose nonprofessional trustees to avoid high corporate fees.

Benefits of Family Members

When a personal touch is needed, family members, or other nonprofessionals who know the family, may offer special advantages as trustees.

They generally have the sensitivity and flexibility required to support the special needs of a beneficiary. A family member or business associate may also be the preferred choice if you are leaving a business in trust. Corporate trustees generally do not run businesses.

Best of Both Worlds

Often, a combination of professional and nonprofessional trustees may work best. Corporate or professional trustees provide trust management expertise, while family members or other nonprofessionals respond to the changing needs and circumstances of beneficiaries. Trusts are complex, varying by type and purpose, and are most likely to fulfill their objectives when responsibly administered. An inappropriate choice of trustee could invalidate a trust or have serious tax consequences.

A qualified legal professional can help you make the most appropriate choice for your particular situation. The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may

be entirely different. The information provided is not written or intended as tax, legal, or financial advice and may not be relied on for purposes of avoiding any Federal tax penalties.

Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any securities. This article is reprinted with permission from LIBERTY PUBLISHING, INC., BEVERLY, MA COPYRIGHT 2010.