How to Pick a Trustee for Your Trust

Without fail or exception, the question we ask our clients that gives them the most pause, aside from how they want to design their distribution of course, is who they want to pick as the successor trustee of their trust. Turning the question to you: who do you trust to be in charge of your estate after you die? Being a trustee is a large responsibility and entails needing to do a lot of work. Below, we will discuss what you need to know when picking your successor trustee – the person who will take over as trustee at your death or incapacity and have the responsibility of running your estate.

What Makes a Good Trustee

A good trustee is going to be someone you trust to do a good job managing and settling your estate. Generally speaking, they should be organized, responsible, a good communicator and, to put it bluntly, have a bit of a backbone or at least be someone who will not succumb to peer pressure. They do not have to be a financial guru or genius. They need to be a responsible and careful person who is willing to also seek help where they need it.

Additionally, if you have minor children or wish for money to be distributed overtime rather than as a lump sum, then that trustee will be the one managing the funds throughout the period meaning they have to be willing to potentially perform for a period of months or even years.

Lastly, keep in mind that you can pick more than one person to be trustee at a time. You can pick co-trustees to work together as a compliment and also act as a check on the other. They will need to work together to do anything though, so they need to be on speaking terms with each other and be willing to work together. Do not pick estranged family members with the hope that being co-trustees is going to be the experience that will bring them together. Trustees have a lot on their plate, so additional tension will only make matters worse.

So long as you keep the above in mind, you are ready to weigh your options and pick your trustee. However, if you want to know a little more about what being a trustee entails or you still are not sure of your selection, then keep reading to learn about the duties a trustee will need to perform.

Trustee Duties

Trustees have, what are called, legal duties. These are the rules they must follow and the rules by which their potential liability will be determined should they find themselves in a lawsuit due to mismanagement. Beneficiaries are the watchdogs of the trustee, meaning they have standing to bring suit. With that in mind, here is an overview of some duties and tasks your trustee will have to follow.

Three of the major duties of a trustee are the duties of care, loyalty, and communication. Each of these duties blend into each other so there are not necessarily black and white definitions for each, but that does not mean they are vacuous or made up of nothing. For instance, trustees must manage trust assets prudently, that is carefully, competently and with honesty. A trustee has likely not breached their duty of care when stock market loses means the estate loses value or real estate sells at or less than market rate. However, if a trustee were to invest the entirety of the trust estate in one particular stock or something as volatile as cryptocurrency, then their actions likely would not be considered prudent.

Likewise, if the trustee were to benefit from an investment in the trust or in a transaction with the trust, such as purchasing real property from the trust, then not only may they be considered not to have acted prudently or with care, but they will also be accused of violating their duty of loyalty to the beneficiaries. Trustees must work in the best interest of the beneficiaries, not their own self-interest. Trustees must also treat all beneficiaries equally and not favor one over the other – a duty so often forgotten in blended marriage situations or where there is a black sheep beneficiary.

Extending from these duties, trustees are also required to communicate to beneficiaries, respond to reasonable requests, and provide a periodic accounting of the trust assets to the beneficiaries – usually once a year and when the trust is closed down. This means trustees cannot shut themselves away from the world and work in secret. There needs to be some form of an open line of communication and documentation throughout the administration.

Finally, keep in mind, a trustee is not required to work alone. They are allowed, if not outright expected, to hire professionals to assist with the administration. These professionals include, of course, lawyers for the legal work and guidance; a financial adviser to manage investments if the estate is substantial enough; accountants, CPAs, or EAs to help with the required accounting and tax returns to be filed to both the federal and state governments; real estate agents for any real properties to be sold; and so on. Trustees need not be stellar money managers or an expert in any particular field, as mentioned previously, they should be responsible and know when it is best to rely on the advice and guidance of another when they need it.

Bottom line – when deciding on a trustee, pick someone who you trust. Someone who is responsible, organized, has a good head on their shoulders, and who will not bend to whims of that one beneficiary who thinks they know better or who wants to stir the pot so to speak. Also, if you want to know more details about some of the duties and tasks we have mentioned, then do not forget to subscribe to our newsletter here or our YouTube channel here to stay up to date for when the post all about a trustee’s duties in detail is released.

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