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Who Should Be Your Trustee?


Who Should Be Your Trustee?More and more families are recognizing the usefulness of trusts for both care plans  and estate plans. Attorneys remind us that in addition to thinking critically about the type of trust needed and the assets placed in it, we must also be wise in the selection of the trustee or trustees who will administer it. Read on for guidance.


Reliable and Action Oriented

Effectively setting up a trust requires careful attention to details, including the type of trust that will best meet family goals and a trust agreement that comprehensively and specifically explains how the assets placed in the trust are to be managed and distributed. Appointing a trustee to administer it is another decision that requires clarity and attention. While most parents are quick to name one or all children as trustees, doing so is not a requirement, and can sometimes end up being a detriment. For example, if all children are named as trustees, then all are required every time sign off or other administrative tasks are necessary, which can prove to be time consuming and impractical. Sometimes, it may be best to designate one child as a trustee and other children, friends or relatives as successor trustees, in the event the designated trustee cannot complete their duties.


When designating a trustee, it is important to consider a reliable person who deeply understands the intentions of the trust and can be counted on to administer the trust accordingly. Unless a trust is complicated, expertise is not necessary but having time and being organized and diligent are. Mark Dodds of GMD Legal offers this overview of the basic qualifications of a solid trustee:


Any person appointed as trustee must be a person who can be trusted to carry out the terms of the trust without interjecting their own biases into the process….The trustee should be a person who will…get the job done. I hear stories from beneficiaries who tell of how their trustee, often a sibling, is not doing anything, and months and years have passed without …distribution of the parents’ estate.A trustee should be a person who has good organizational skills, and a good work ethic, and also will have the time and sufficient financial acuity to enable them to properly administer the trust. If the Trustee does not at a minimum have these qualifications, the purposes and benefits of the trust will likely be compromised. It is not necessary that the trustee be a CPA or lawyer, but they should be someone who has a basic understanding of finances and investments.


Ultimately, whether a friend, relation or professional is selected, the trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement may require a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.

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Complex Trust?

Estate planning experts point out “The simplest form of trust, one of which the entire trust estate will be distributed outright among a few individuals and institutions, can be handled by almost anyone with integrity and a good work ethic.” However, when there are complexities involved, a trustee with more skills and experience may be the best choice. This could be true, for example when minors are involved, or when beneficiaries have special needs. These kinds of dynamics generally require the trustee to exercise judgment in the distribution of trust assets. Trustees must also be capable of handling the estate received,” so if the trust contains an operating business, knowledge of managing it, and remaining fair to all beneficiaries is essential. Another consideration in designating trustees is longevity:


Many trusts can go on for decades, even longer.Be sure to name trustees who can act for long periods of time and also provide a means for a proper person to be appointed to carry on with the trust in the coming years.Some beneficiaries may live into their 90’s, so it is necessary to …name a successor trustee such as a bank or trust company.Other trusts, sometimes called “dynasty trusts,” are established to continue for multiple generations, so a method for appointing appropriate trustees as the years go by is critical to the success of the planning.


When making decisions about the appointment of trustees, keep in mind that it is an option to designate a professional or institution and sometimes, complex circumstances make doing so a solid choice, as Dodds sums up: “When an institution such as a bank or trust company acts in a fiduciary capacity, that institution is bound to act in the best interests of the beneficiary. Although such professional trustees charge fees, usually around 1% of the amount under management each year, the benefits of professional, independent, license, and bonded management are worth the costs.”


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