How to Choose a Trustee | The KC Estate Planner
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How to Choose a Trustee

When you establish a trust, you name someone to be the trustee.  For most revocable trusts, you will be the initial trustee.  A trustee does what you do right now with your financial affairs—collect income, pay bills and taxes, save and invest for the future, buy and sell property, provide for your loved ones, keep accurate records, and generally keep things organized and in good order.

Key Takeaways

  • You can be the custodian of your revocable living trust. If you are married, your spouse can be a co-trustee.
  • Most irrevocable trusts do not allow you to be a legal guardian.
  • Even though you may be allowed to be your own trustee, you may not be the best choice.
  • You can also choose an adult child, a trusted friend, or a professional or corporate trustee.
  • Naming someone else to be a co-trustee with you helps your co-trustee become familiar with your trust. It allows your co-trustee to learn how you want the trust to operate, and lets you evaluate your co-trustee’s abilities.

Who Can Be Your Trustee

If you have a revocable living trust, you can be your own legal guardian. And if you are married, your spouse can be a legal guardian with you. If either of you becomes incapacitated or dies, the other spouse can continue to handle your financial affairs without interruption. Most married couples who own accounts and property together, especially those who have been married for some time, are usually co-trustees.

However, you do not have to be your own successor. Some people choose an adult child, a trusted friend, or another relative. Some prefer a professional or corporate trustee (e.g., a bank trust department or trust company) for the experience and investment skills these entities offer. Naming someone else as a co-trustee does not mean you lose control. The custodian you name must follow the instructions in your trust and report to you. You can even replace your legal guardian if you change your mind.

When to Consider a Professional or Corporate Trustee

A professional or corporate trustee is valuable in several instances. You may be elderly, widowed, or in declining health with no children or other trusted relatives living nearby, or your other candidates may lack the time or ability to manage your trust. On the other hand, you may simply not have the time, desire, or experience to manage investments by yourself. Also, certain irrevocable trusts may not allow you to be a legal guardian due to tax laws restrictions. In these situations, a professional or corporate trustee may be exactly what you need: they have the experience, time, and resources to manage your trust and help you meet your investment goals.

Professional and corporate trustees are also worth considering as a successor if your trust will remain in existence for any period of time after your death. For example, if you establish a trust that will ultimately provide for your grandchildren (or future grandchildren), then choosing a corporate or professional trustee as your successor will ensure that the role of trustee does not become vacant due to the death or disability of an individual.

What You Need to Know

Professional or corporate trustees will charge a fee to manage your trust. However, the fee is generally quite reasonable, especially when you consider their experience, the services provided, and the investment returns that a professional trustee can deliver.

Actions to Consider

  • Honestly evaluate whether you are the best choice to be your own legal guardian. Someone else may do a better job than you, especially with regard to investing your money.
  • Name someone to serve as co-trustee now. This eliminates the time a successor would need to become knowledgeable about your trust, your accounts and property, and your beneficiaries’ needs and personalities. It would also allow you to evaluate whether the co-trustee is the right choice to manage the trust in your absence.
  • Evaluate your candidate trustees carefully and realistically.
  • If you are considering professional or corporate trustees, talk to several. Compare their services, investment returns, and fees.

The KC Estate Planner can help you select, educate, and advise your successor trustees so they will have the support and know what to do next to carry out your wishes. Give us a call today.