Before we talk about how to choose the right Trustee, let’s talk about what a Trustee does and whether you need to choose a Trustee.
A Trustee is the legal owner of assets held in Trust. When you establish a Revocable Living Trust, you will be the Trustee of your own Trust as long as you are alive and able to take care of your own finances.
At the time of your death or in the event of your incapacity, your “successor” Trustee would step in to take over control of the assets held in your Trust.
This does not mean that the Trustee can use the Trust assets for him or herself. The Trustee is required to use the assets only for the benefit of the Trust beneficiaries, who are determined by you. If you are living and incapacitated, typically you would be the beneficiary of the Trust. If you are no longer living, the beneficiaries will be the people you name to receive your assets.
The Trustee will have control over how the assets are invested, ensuring that tax returns and other filings are handled, and will be responsible for making distributions to the beneficiaries.
The number one most important quality when choosing a Trustee is, as the name suggests, Trust. While the Trustee is not supposed to use assets for his or her own benefit, there are no trust police checking on what the Trustee does. Therefore, it’s critically important that you Trust your Trustee to do the right thing. And, it’s not a bad idea to include a system of checks and balances within your planning to ensure that your Trustee is doing the right thing.
Once you’ve chosen someone you can trust, the next most important factor is that they have common sense, good organizational skills, and a willingness to seek professional guidance. The job of Trustee entails quite a bit of paperwork and compliance requirements in order for the Trustee to maintain his or her responsibilities (legally known as fiduciary obligations).
The Trustee should seek guidance from a team that includes a tax advisor, a legal advisor, and a financial advisor. A Trustee that intends to handle taxes and investments without guidance and does not seek the counsel of a lawyer is destined to fail.
Last, but not least, your Trustee should be the person that will make financial decisions for your heirs as close to the way you would. As I like to tell my clients, choose the person or people who would give your kids the same answer you would if your kids came to them at the age of 19 and said, “I don’t want to go to college. I want $50,000 from my Trust so I can {travel Europe, start a band, start a business, etc.}” Notice, I didn’t say that the Trustee would give the “right answer” – just the same answer you would.
To recap, you are looking for someone you trust implicitly, has common sense, good organizational skills, is willing to seek guidance from a legal advisor, tax advisor and a financial advisor and will make the same choices for your heirs that you would financially.