Once a person has decided to establish a trust as part of his or her estate plan, another important decision needs to be made in order to complete the trust formation process – choosing a trustee. Choosing a trustee is important because the person or organization the trust settlor selects to serve as trustee bears the responsibility of working for the best interests of the trust beneficiaries and protecting the trust interests.
If the trustee is an individual, one of the most important things to consider is whether you, as settlor, can trust the trustee to properly manage the trust. This is not a legal requirement, but it is an important consideration. In choosing family and friends to serve as trustees, the settlor usually attempts to pick a person he or she believes will truly act in the best interest of the trust beneficiaries.
In addition, it is important to consider if the person you select as a trustee has a poor financial history. The trustee will be required to make decisions that will affect the value of the trust assets. The law requires the trustee to act like a prudent investor would, unless there are restrictions on the kinds of investments the trustee can make. Selecting a trustee with poor financial judgment could mean the beneficiaries will receive less than the settlor intended.
If you name one family member to serve as trustee, you should consider whether that decision will cause a strain in the relationships between the trustee and the other family members. This may be the case if one sibling is chosen to serve as the trustee from a group of siblings.
Not everyone who is selected to serve as a trustee accepts the role. It is advisable to name several options for trustees, or use language when setting up the trust that allows you to changes trustees when necessary. Changing trustees after the trust is formed may not be possible in some cases.
Another option for the choice of trustee is the use of a company that offers trust administration services. Using a trust company can be advantageous because the company has experience in trust administration and is likely to make investment decisions without becoming emotional. Unfortunately, trust administration companies can also charge fees to administer the trust, and this can cause some people to opt not to use them. The fee is something that needs to be considered in light of all the other pros and cons of using an institutional trustee instead of an individual.
In some cases, it is possible to name a team or group of people to serve as trustee. This team of people would generally only make trust decisions based on their agreement on the issues unless otherwise stated in the trust documents.
Contact an Experienced Attorney
If you are thinking about setting up a trust as part of your estate, you need to talk to an experienced estate planning attorney who can assist you in deciding what kind of trustee you should appoint. Contact Resnick Law, P.C., to consult our experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan. Our estate planning attorneys are also experienced in trust administration and can explain how we can serve as an institutional trustee for your trust.
(image courtesy of Olu Eletu)