SELECTING A TRUSTEE: INDIVIDUAL OR TRUST COMPANY?

A trust is a great way to ensure that your final bills will be paid, your personal property will be distributed, and your remaining assets will be distributed or held in trust per your wishes.  A trust also allows for someone to manage the trust assets for your benefit while you are still alive but unable to attend to your financial affairs.

But who do you select for this role? Who should you trust to be your trustee? Should you choose a specific person, or consider a trust company?  Here are some factors to consider when making this important decision.

Choosing an Individual.

  • A child, family member, of friend that has demonstrated financial responsibility can be a good choice.  This person will be expected to communicate professionally and effectively with the beneficiaries.  These qualities will reassure you that they are well-suited for this role and that they will maintain a level of professionalism and bring integrity to the process.
  • A benefit to an individual serving as trustee is that this person probably knows you and your beneficiaries and can navigate those relationships well.  The likelihood of the person you have nominated as trustee to accept the position as trustee is much higher as they might feel an obligation and sense of duty to honor you for choosing them as the right person for the job.
  • Although the trustee should consider hiring an attorney to ensure the trustee is properly advised of the laws and their duties as trustee, it can still be a cost-effective solution to choose an individual.  It is rare in my experience for an individual trustee who is a child of the deceased to charge the trust for the work the trustee performs.  The trustee’s relationship with the deceased and the beneficiaries along with the sense of duty to carry out the deceased person’s wishes has driven many trustees that I have worked with to provide this service at no cost.  This leaves more for the beneficiaries to share.
  • An individual trustee will likely not consider the amount of the trust assets to determine whether to accept the position as trustee like a trust company would. Usually asset levels must be met for a trust company to agree to act.
  • Choosing the wrong individual can be devastating.  Someone who might abuse their relationship to the trust, not keep beneficiaries informed, or inappropriately use trust funds are some of the risks involved that you would not have to fear with a trust company.

Choosing a Trust Company.

  • A trust company brings experience and professionalism to the trust administration process.  A professional will have experience with asset management, record-keeping, reporting to beneficiaries, and an understanding of the laws governing trusts.
  • Because a trust company does not have a relationship with your beneficiaries the trust administration process will be unbiased and free of any history that a personal trustee might have with a beneficiary.  The beneficiaries will be able to engage with a neutral party and be kept well-informed of the status of the administration.
  • Selecting a trust company may involve a higher cost to the trust as a fee for the trustee’s services will be charged and will likely involve hiring a variety of professionals to clean out a house, have an estate sale, hire a relator, etc.  Although hiring out these services does involve a level of professionalism that should provide comfort to the beneficiaries. An individual trustee, whether well-suited to do it or not, is more likely to take some of these tasks on personally which can result in cost-savings to the trust.

These are just some points to consider as you select a trustee and successor trustees to handle your trust.  Please contact us if you would like to talk over additional considerations with us.

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