How to Choose a Trustee

Choosing the right Trustee is a very important decision. In fact, it can be as crucial a decision as choosing a guardian for your minor children. Oftentimes, people will pick a family member (like the oldest child) by default, but this can be a mistake.

Today, we’re going to break down the trustee role, explain what makes someone a good or bad choice, and take a look at common mistakes people make when choosing a trustee.

At the end of the day, the right trustee will ensure your wishes are honored. But the wrong one can create conflict and derail your plans. We want to help you avoid that!

What Does a Trustee Actually Do?

Your Trustee executes the directives you leave for them in your Trust agreement. Their job is to make sure that this agreement, which is essentially a contract, is followed to completion.

In your Trust, you have made many provisions about what happens to your assets, who gets them, and how those gifts are given. You may have certain beneficiaries you trust with a large lump sum, given all at once. You may also have beneficiaries who need smaller allowances over the years and decades. It’s the job of the Trustee to make sure the rules you put in place are followed.

This means that your Trustee also needs to keep good accounting of funds that pass in and out of the Trust.

Who is a Good Candidate for Trustee?

Just because you trust someone doesn’t mean they should be your trustee. But just because someone is good with money does not automatically qualify them either. Your Trustee should tick most of the following boxes:

• Trustworthy
• Professional
• Detail Oriented
• Willing
• Steadfast

Your trustee absolutely must be someone or an entity that you trust. They will be following your final wishes, so you need to trust that they will.

In the same vein, this is an important and serious role. The person or entity carrying it out needs to treat it as such.

There will come a time when your Trustee will have to provide information to beneficiaries about the status of their inheritance. They will need to be on top of it and have the information readily available. Attention to detail is important.

Your Trustee should be willing to serve in this role. There should be a general desire to do this job for you. And that desire needs to go beyond obligation. It’s not just about doing the right thing. It’s about doing it well and with the right skill set.

There will be days when it might seem easier to just throw their hands in the air and do whatever it takes to be done— without regard for the rules and wishes established in the trust agreement. But they must stay the course. This is why it is important that you choose someone who will remain steadfast through difficult circumstances.

You may have the perfect person in mind for this role who checks all of the boxes except maybe, for example, they aren’t great at math. Keep in mind that you can name that person as trustee and direct them to hire a professional accountant to help them stay on top of the books.

The important thing is working closely with a skilled estate planning attorney to help you get all of the pieces in place for success.

Trustee vs. Executor

Remember, the Trustee is responsible for making sure the trust agreement is followed. The executor follows the rules set forth in your Will and works with the probate court to make sure they are followed.

Everyone needs a Will. But if you have a Trust, your Will is called a Pourover Will.

In most cases, the person you name as your Trustee would also be named as your executor. If your Trustee is a professional trust company, it may make sense to name a family member or close friend as your executor. But maybe not. That’s why working with an attorney like me is so important. I can help you weigh those options.

Common Mistakes

Mistake #1 – Choosing a Family Member

As we said above, many people automatically choose a family member to serve as their trustee. In many cases, this can work out beautifully, but in other situations, this becomes a major problem for everyone involved.

Scenario 1: Say you name your oldest child as your trustee. And for the sake of argument, let’s say they are responsible and well-suited for the role. But they have a significant conflict with one of the beneficiaries in your trust. That beneficiary is a sibling, and their relationship with your eldest is on the rocks. That younger child is not responsible, so you had to put some guardrails on their inheritance. Your oldest child is the bad guy enforcing those rules. And it’s not going well.

Truthfully, this is a situation where naming a responsible child to do this job actually puts them in a horrible situation relationally. And it would be better, all around, if someone unrelated were in the middle of it.

Scenario 2: You name a family member who you feel is trustworthy and has always been good to you. But in their lifetime, they have always been disorganized and free-spirited. This is not a good fit. Your Trustee needs to be organized and efficient, as well as trustworthy.

Mistake #2 – Not Paying a Professional Trustee

Many people choose to name a close friend or relative as their trustee because they either don’t want to pay a professional or don’t realize they can.

The cost of having a professional trust company administer your trust is often a barrier for people. They don’t want a dime going to a big corporation or bank. But in many cases, hiring a professional trust company can save your loved ones hassle and heartache— especially when relationships between beneficiaries may be dicey.

It’s important to know all of your options before you make a big decision like choosing a trustee. If you need a referral to a trust company, ask us! We have relationships with many and can point you in the right direction.

Mistake #3 – Thinking Your Trustee Can Read Your Mind

Oftentimes, a person will choose a Trustee they feel closest to. This is because they trust that person. They may even believe that if things get complicated or if something is unclear that their trustee will be able to magically determine exactly what they would want done. This is not a good strategy.

It is crucial to name a person or company that you trust. But it is also as important to clearly state exactly what you want and expect to be done under all circumstances.

Don’t leave anything to mystery. Be clear and concise, and choose a trustee who will execute your wishes with the same attitude.

FAQs

Professional Trustee vs. Family Member – who wins?

Every estate is different. Every family is different. A good rule of thumb is that if your estate is really complicated or if the family dynamics are really complicated, it may be good to hire a professional trustee. If you are putting one family member in a bad situation with another, hire a professional. If you don’t have someone responsible to give the job to, hire a professional.

What is a trustee?

A Trustee is the person or entity responsible for carrying out the rules laid out in the Trust agreement.

How do I avoid conflict between my trustee and beneficiaries?

Talk to everyone in advance and let them know your plan. Make sure your wishes are very clear in your trust agreement and tell your loved ones what those wishes are. Also, remember that a professional has no emotional connection to your family. They are unbiased and just following the rules you left for them to follow. Family members are emotional. And that isn’t always a bad thing. But it can lead to rifts between loved ones if someone feels slighted.

Why hire a professional trustee?

A professional trustee has no emotional connection to your estate or beneficiaries. They will carry out your wishes without bias. They don’t care if your beneficiary feels your wishes are unfair. They follow the rules you left.

Is a professional trustee expensive?

Professional trustees do charge a fee for their service. In some cases, it may be an unnecessary financial expense. But if your estate or beneficiary situation is complicated, it may be worth it.

How is a professional trustee paid?

Typically, a professional trustee is paid from the estate’s assets. Usually, an agreed-upon percentage is paid to the trust company annually.

Can my loved one be paid for serving as trustee?

Yes. You can put language in the trust that allows for the trustee (even if that person is not a professional) to be paid from the estate’s assets.

Next steps:

You might feel intimidated or stressed about all of this, but it’s okay. When you become my client, we become a team. As a part of your team, I will help you determine what your best interests are. We will discuss your beneficiaries, your trustee options, and your unique situation, and we will come up with a plan that serves you and your loved ones in the best way possible

Call us at (404) 736-6066 or visit our website to schedule a consultation about how we can help you pass your assets and wealth on to future generations— without worrying about whether or not your trustee is the right fit.