How to choose the right person as your trustee

Trusts play an important part in many estate plans, but many settlors (the persons establishing the trust) play very little attention to the selection of the trustee. Trustees play an important part in the successful execution of an estate plan, and the choice of a trustee should not be left to chance. Instead, the settlor must understand the functions that a trustee must serve to accomplish the objectives of the estate plan.

What is the role of a trustee?

A trustee has many responsibilities, but his most important role is the effectuation of the settlor’s intentions. The trustee cannot let his or her own ideas or wishes intrude on the duty to execute the settlor’s intent. The trustee must first take possession of trust assets and then manage those assets to protect and maximize their value. The trustee must keep accurate records of trust assets and any changes in the value of those assets. If one beneficiary wants to withdraw trust assets for a personal use, the trustee must decide whether the withdrawal is permitted by the trust instrument. If the trust instrument gives specific instructions regarding the disbursal of trust assets, the trustee must ensure that these instructions are properly followed. The trustee owes a duty of due care to all of the trust’s beneficiaries, and the trustee cannot favor one beneficiary over the others.

Potential trustees

Some possible trustees could include:

  • Friends or family members are commonly named as trustees because they are known to the settlor, and the settlor is comfortable entrusting the trust to such persons. However, an individual trustee may die before the trust assets are completely distributed, thereby necessitating the nomination of a replacement trustee. Another problem with nominating a friend or relative is that the friend or relative may not have the skills to properly manage trust assets.
  • Another type of trustee is a private professional trustee. Attorneys are often chosen to fill this role. In California, private professional fiduciaries must obtain a license from the state. Most private trustees also have professional expertise in one or more of the fields needed to manage trust assets.
  • The third type of trustee is a corporate trustee. Most banks have established trust departments to offer trust management services. Perhaps the most important benefit obtained from appointing a corporate trustee is the assembly of all essential management skills under one roof. Corporate trustees will charge fees that may be significantly higher than either friends or private professional trustees.

Making informed decisions

Choosing a trustee is a very personal decision, and it should not be made without thorough consideration of the various alternatives. The choice of a trustee should be reviewed with the attorney who drafted the trust instrument. Also the settlor should interview several trustee candidates before making a final choice.