Tips for Picking the Right Person as Your Trustee
A trust agreement is among the most popular additions to a comprehensive estate plan. If you choose to include a trust in your comprehensive estate plan you will need to appoint a Trustee to administer the trust. Unfortunately, this is where many people make a costly mistake that could cause the trust to fail. To prevent that from happening to your trust, the Coral Gables trust attorneys at Stivers Law offer some tips for picking the right person as your Trustee.
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime.
Understanding What Your Trustee Will Be Expected to Do While Administering the Trust
A Trustee is responsible for managing the trust assets as well as administering the trust using the trust terms created by the Settlor. Some specific duties and responsibilities of a Trustee include:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
Tips for Picking the Right Trustee
One of the most common mistakes people make when they create a trust is to appoint someone close to them as the Trustee without considering if that person is right for the job. To help you avoid making that mistake, look for the following traits and characteristics when choosing your Trustee:
- Willingness to Serve. Although often overlooked, the most important thing to consider is whether the individual is willing to serve as your Trustee. It is surprising how many Settlors appoint Trustees without first discussing the appointment with the Trustee. Always ask your future (hopefully) Trustee if he/she is willing and able to serve in that function before making the appointment official.
- Experience, Skills, Education. Experience, skills, and/or education in the financial and/or legal field will go a long way toward successfully administering a trust given that the Trustee’s job involves investing trust assets and understanding the laws that apply to trust administration.
- Ability to Respect Your Wishes. Look for someone who will not insist on injecting his/her opinion into things and who can respect your wishes. Choose someone who will work diligently to fulfill your stated trust purpose, even if he/she doesn’t agree with the purpose.
- Free of Conflicts. Your Trustee should not have any conflicts with the trust beneficiaries. If the Trustee already has a significant personal relationship with a beneficiary, this can often lead to a conflict of interest that can harm the trust because your Trustee should remain neutral.
- Detail Oriented. A Trustee is responsible for keeping detailed records of all trust business so appointing someone who has experience with keeping similar records is always a plus.
- Conflict Resolution Skills. If your trust includes more than one beneficiary, a conflict among the beneficiaries may arise at some point. Having a Trustee who can resolve that conflict without the need for litigation is an excellent benefit to the trust.
Contact Our Coral Gables Trust Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about picking the right Trustee for your trust, contact our experienced Coral Gables trust attorney at Stivers Law by calling (305) 456-3255 to schedule an appointment.