When you are planning your estate, you might choose to include a trust instead of just a will. And if you choose to set up a trust, you might choose to appoint a trustee to assist with recordkeeping, trust administration, and investment management.
How to Choose Your Trustee
Who you choose can make all the difference. As the name implies, a trustee must be trustworthy. The Balance offers three questions to ask about potential trustees:
- Is the person capable, qualified, and willing to serve as trustee?
- Will naming this particular person hurt family relationships or cause problems down the line?
- Does this person offer continuity and protection against malfeasance?
Everplans suggests additional characteristics to look for:
- Attention to detail
- An understanding of duties, and a commitment to taking those duties seriously
- An understanding of finances and perhaps investing, accounting, or law
- Good communication skills
- Morals and values that you agree with
Also, consider the age and health of your trustee. You want to choose someone who will likely outlive you long enough to administer your estate for your beneficiaries. Even if your trustee is young and in excellent health, you should consider a backup.
Family Member or Professional Trustee? Pros and Cons
Considering loved ones as trustees is a natural move. But it’s important to consider the pros and cons of choosing family or friends, as outlined by Forbes.
- The Pros of Choosing a Loved One
- They are going to be most familiar with you and your family
- They will understand your family’s dynamics
- Family members often do not charge a trustee fee (although they are usually entitled to take a fee) and professional trustees tend to be more expensive.
- Sometimes a loved one’s ideal role is to act as a neutral third party who can remove or replace a trustee. For example, you might choose a professional trustee to manage the assets left to your beneficiaries. However, you might be concerned that a professional company could be harder to remove, or tightfisted when it comes to making distributions. Appointing a loved one as a reliable third party could balance things out, suggests Forbes.
- The Cons of Choosing a Loved One
- Your family may be better served with a professional trustee who has expertise with trust administration.
- A family member taking or not taking a fee could lead to resentment. Being a trustee is usually a lot of work. If a family member agrees to work without a fee, they might end up resenting that later. On the other hand, if the trustee does take a fee, your beneficiaries might resent this! Another disadvantage is that your family member may be too close to the family and may get caught up in the drama.
- Family members can sometimes get on a power trip and enjoy being in control of your beneficiary’s finances.
- You may want someone with a little more distance who will see your beneficiaries with a fresh set of eyes and treat them equally, says Forbes.
- Professionals are removed from the emotional dynamics of your family, and can normally make tough decisions more easily.
- Trust companies bring structure and oversight to the trust administration. This service comes at a cost, but in many instances it will be money well spent. Forbes recommends using a trust company when the beneficiaries do not get along, when there is a problem beneficiary, or when you are dealing with large sums of money, a complex estate, or an estate that includes a business.
If you can’t pinpoint one trustee who makes sense for your estate, consider co-trustees. Why not appoint a family member and a professional trust company? This will give you the benefit of both the professional expertise and emotional distance, while also having someone who really understands your family.
Additionally, you can structure your estate planning documents in such a way that gives others, such as your spouse, the ability to remove and replace the trustee. You also may be able to remove and replace the trustee during your lifetime. You can also let someone else decide if you are really at a loss. You can plan your estate so that your beneficiaries will choose the trustee after your death. Or, you can let your attorney choose the trustee down the road.
Whichever route you choose, don’t procrastinate on planning your estate in St. Petersburg. The Baby Boomers’ Barrister can help you make the hard decisions and ensure you leave the legacy you want for your loved ones. Contact us today at (727) 565-4250 or online.
100 2nd Avenue S.
St. Petersburg, FL 33701
3030 N. Rocky Point Drive W.
Tampa, FL 33607