The idea of appointing a trustee seems simple enough, but choosing the right person is a complex decision that should not be taken lightly. Many things go into setting up a trust, including how the assets will be dispersed and the amount that goes to each beneficiary. But the person you choose as trustee is one of the most important decisions you will make.
Here are four things to ask yourself when choosing a trustee:
1. What are the trustee’s responsibilities?
A trustee ensures that the intentions of the trust are carried out appropriately, but how is this carried out? The trustee has a lot of responsibilities, including:
- Filing all required paperwork, including tax returns.
- Maintaining records and being accountable to beneficiaries.
- Managing distributions while considering the needs of all beneficiaries.
- Protecting, monitoring, and investing assets, whether alone or while working with an investment manager.
2. What skills do they need?
To manage these responsibilities effectively, some skills to look for in a trustee are:
- Good judgment
- Technical know-how
- Time to commit to being the trustee
- Able to work effectively with all beneficiaries
3. Who are your options?
The trustee plays an important role and choosing the right person is essential for the health of the trust. In addition to thinking about the duration, size, and purpose of the trust, tax implications, and beneficiaries, you should also consider who will best serve the trust. The trustee can be anyone from a friend or family member to a corporate entity, accountant, or lawyer.
The way the specifics of the trust interact with the trustee should be carefully considered. For example, you may trust a family member who knows the beneficiaries personally, but an accountant or lawyer will have more knowledge about the financial and legal implications of the trust than a family member. That said, appointing more than one trustee can help bridge this gap. For example, a family member working in conjunction with a corporate entity ensures that everything is covered.
4. Should you choose a successor to the trustee?
After choosing a trustee, you should also consider a successor. There are a few ways to go about designating a successor. You can create a specific list naming successor’s or allow trustees to choose their own successors. Alternatively, you can choose someone to appoint a successor or name a corporate trustee to fill any vacancies.
When creating a trust, it is important to set it up so that it’s managed carefully and your loved ones get the benefits you intended. This result involves carefully crafting the provisions of the agreement. But it is just as important to choose the right trustee to ensure that your wishes are carried out as intended.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.