When you establish a trust, one of the important decisions you make is choosing the trustee. If you are creating a revocable living trust, you will likely be the initial trustee. You also will name successor or backup trustees to step in and manage the trust’s affairs if you can no longer manage the trust yourself. The trustee is given responsibility to manage the trust’s accounts and property. Specific duties can include collecting income, paying bills and taxes, making investment decisions, buying and selling property, providing money for you (during your lifetime) and your loved ones according to the trust’s instructions, keeping accurate records, and generally keeping things organized and in good order.
Key Takeaways
- You can be the trustee of your revocable living trust. If you are married, your spouse can be your co-trustee.
- An irrevocable trust may not allow you to be a trustee.
- Even though you can be the trustee, you may not always be the best choice.
- You can choose an adult child, a trusted friend, or a professional or corporate trustee to act as trustee.
- As a trustee, you can hire certain individuals or professionals to assist you or any successor trustee in managing your trust.
- Naming someone else to be a co-trustee with you helps your co-trustee become familiar with your trust, allows your co-trustee to learn firsthand how you want the trust to operate, and lets you evaluate your co-trustee’s abilities. If you decide to add a co-trustee, you may want to talk to your banks and other financial institutions to learn their co-trustee policy. Some do not like to work with co-trustees in general, while others require that the terms of the trust state that each co-trustee can act independently of each other (rather than requiring both co-trustee’s signatures or authorization for all acts on behalf of the trust).
Who Can Be Your Initial Trustee
It is common that a trustmaker chooses to act as their own trustee initially. Married trustmakers often act as co-trustees. If either of you became unable to manage your affairs or dies, the trust often authorizes the other to continue to handle your financial affairs without interruption. Most married couples who own accounts and property together, especially those who have been married for some time, usually elect to serve as co-trustees.
However, you do not have to be your own trustee. Some people choose an adult child, trusted friend, or relative to serve in this capacity. Some individuals prefer a professional or corporate trustee such as a bank trust department or trust company to assist because of their experience and investment skills. Nominating someone else to serve as trustee or co-trustee of your trust does not mean you lose control. The trustee you nominate must follow the instructions within your trust and may ultimately report to you. In many cases, you can even replace your trustee if you change your mind or the arrangement is not working out how you had envisioned.
When to Consider a Professional or Corporate Trustee
A professional or corporate trustee will be valuable in several instances. You may feel as though you are not able to serve as trustee for a variety of reasons. If you are elderly, widowed, or in declining health with no children or other trusted relatives living nearby, and your other potential candidates may lack the time or ability to manage your trust, a professional trustee may give you peace of mind that your affairs are being handled appropriately. Or, you may simply not have the time, desire, or experience to manage investments by yourself at any age or health status. Also, certain irrevocable trusts may not allow you to act as a trustee if you are trying to maintain certain tax law benefits. In these situations, a professional or corporate trustee may be exactly what you need. The professional entity has the experience, time, and resources to manage your trust properly and help you meet your investment goals.
What You Need to Know
Professional or corporate trustees will charge a fee to manage your trust. Usually, the fee will be based on the value of the trust’s accounts and assets they will manage. These fees can be very worthwhile when considering the experience, quality of the services provided, and investment returns a professional trustee can deliver.
Actions to Consider
- Honestly evaluate whether you are the best choice to be your own trustee. Someone else may do a better job than you, especially with investing your money. However, if you choose to be the trustee of your own trust, you can still hire financial advisors to assist you in making the right investment choices. You do not have to do everything yourself.
- Evaluate whether it may be a good idea to nominate someone to serve as co-trustee with you now. Naming a current co-trustee reduces the time a successor would need to become knowledgeable about your trust, your accounts and property, and your beneficiaries’ needs and personalities. It would also allow you to evaluate whether the co-trustee is the right choice to manage the trust in your absence.
- Review your trustee candidates carefully and realistically. Many people assume that their oldest adult child would make a good trustee. However, birth order does not accurately indicate financial management skills.
- Talk with the various professional or corporate trustees that you should consider. Compare their services, investment returns, and fees.
Let Us Help
Schedule time with us. We can help you select, educate, and advise your successor trustees so they will have support and know what to do next to fulfill your wishes. Give us a call today.