How to Choose the Initial Trustee of Your Trust
When establishing a trust, nominating a trustee is a crucial step. If you’re creating a revocable living trust, you will likely be the initial trustee. Additionally, it’s essential to name successor or backup trustees who can manage the trust’s affairs if you are unable to do so.
The trustee is responsible for managing the trust’s accounts and property, which includes:
- Collecting income
- Paying bills and taxes
- Making investment decisions
- Buying and selling property
- Distributing funds to you and your beneficiaries according to the trust’s instructions
- Keeping accurate records and ensuring everything is organized
Who Can Be Your Initial Trustee?
If you have a revocable living trust, you can serve as your own trustee. If you are married, your spouse can act as a co-trustee. This arrangement allows either spouse to manage financial affairs without interruption if the other cannot. Many married couples opt to serve as co-trustees, particularly if they have shared accounts and property.
However, you are not required to be your own trustee. Some individuals choose to appoint an adult child, trusted friend, or relative. Others prefer a professional or corporate trustee, such as a bank trust department or trust company, for their experience and investment expertise.
Nominating someone else as trustee or co-trustee does not mean you lose control. The trustee must follow the instructions outlined in your trust and may need to report back to you. You can also replace your trustee if needed.
When to Consider a Professional or Corporate Trustee
A professional or corporate trustee may be valuable in several situations. If you are elderly, widowed, or in declining health with no children or trusted relatives nearby, a professional trustee can provide peace of mind that your affairs are being handled appropriately. Alternatively, you may simply prefer not to manage investments yourself, regardless of your age or health status.
Certain irrevocable trusts may prohibit you from acting as a trustee due to tax law restrictions. In these cases, a professional or corporate trustee may be the best choice, as they have the expertise and resources to manage your trust effectively and help you meet your investment goals.
What You Need to Know About Fees
Professional or corporate trustees typically charge a fee based on the value of the trust’s accounts and property. While these fees can be significant, they may be worthwhile given the trustee’s experience, the quality of services provided, and the potential investment returns they can generate.
Actions to consider:
- Evaluate Your Ability: Honestly assess whether you are the best choice to be your own trustee. Someone else may manage your investments more effectively. If you choose to be the trustee, consider hiring financial advisors to assist you.
- Consider a Co-Trustee: Nominating someone as a co-trustee can help them learn about your trust and its management while allowing you to evaluate their capabilities.
- Evaluate Candidates Realistically: When selecting a trustee, be cautious. Financial management skills do not necessarily correlate with birth order or family dynamics.
- Research Professional Trustees: If considering a professional or corporate trustee, interview several candidates to compare their services, investment returns, and fees.
Get the Support You Need
We can help you select, educate, and advise your successor trustees, ensuring they know how to fulfill your wishes. Give Williams Starbuck a call today!