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Thursday, August 23, 2018

How to Choose a Trustee

How to Choose a Trustee

When you establish a trust, you name someone to be the trustee. A trustee is someone who "holds" property for the benefit of another. By "holds" we mean a trustee does what you do right now with your financial affairs - collect income, pay bills and taxes, save and invest for the future, buy and sell assets, provide for your loved ones, keep accurate records, and generally keep things organized and in good order. In actuality, the trustee has legal title to the property, but as stated above, it is for the benefit of another and according to the terms of a trust.


The Key Takeaways

  • You can be trustee of your revocable living trust. 
  • Most irrevocable trusts do not allow you to be trustee.
  • Even though you may be allowed to be your own trustee, you may not be the best choice.
  • You can also choose an adult child, trusted friend or a professional or corporate trustee.
  • Naming someone else to be co-trustee with you helps them become familiar with your trust, allows them to learn firsthand how you want the trust to operate, and lets you evaluate the co-trustee's abilities.
  • A co-trustee also helps with end-of-life succession providing an easier transition for the management of your trust assets should you become incapacitated and when you pass away.


Who Can Be Your Trustee

If you have a revocable living trust, you can be your own trustee. You can name other individuals or entities to serve as co-trustee such as your spouse. The benefit of naming your spouse as co-trustee is that if either of you become incapacitated or die, the other can continue to handle your financial affairs without interruption.

You don't have to be your own trustee. Some people choose an adult son or daughter, a trusted friend or another relative. Some like having the experience and investment skills of a professional or corporate trustee (e.g., a bank trust department or trust company). Naming someone else as trustee or co-trustee with you does not mean you lose control. The trustee you name must follow the instructions in your trust and report to you. You can even replace the trustee of your revocable living trust should you change your mind.


When to Consider a Professional or Corporate Trustee

You may be elderly, widowed, or in declining health and have no children or other trusted relatives living nearby. Or your candidates may not have the time or ability to manage your trust. You may simply not have the time, desire or experience to manage your investments by yourself. Depending on the level of your assets, it is tax-disadvantageous to serve as trustee of certain irrevocable trusts due to provisions in the tax laws. Along with tax implications, asset protection is another factor to consider when selecting a trustee for an irrevocable trust. For asset protections purposes, there are restrictions on who can serve as trustee of your trust and in order to maximize asset protection, a corporate trustee or another unrelated party would be ideal. While an irrevocable trust is less flexible, I will provide you with one of my favorite sayings in the world of trusts, all trusts are revocable and there is no such thing as a truly irrevocable trust. A combination of careful drafting, use of statutes, and a level of creativity make such revocability possible.

If one or more of the situations described in this paragraph apply to you, a professional or corporate trustee may be exactly what you need: they have the experience, time and resources to manage your trust and help you meet your investment goals. Keep in mind, professional or corporate trustees will charge a fee to manage your trust, but generally the fee is quite reasonable, especially when you consider their experience, the services provided, and the investment returns that a professional trustee can deliver.


Actions to Consider

  • Honestly evaluate if you are the best choice to be your own trustee. Someone else may truly do a better job than you, especially in investing your assets.
  • Name someone to be co-trustee with you now. This would eliminate the time a successor would need to become knowledgeable about your trust, your assets, and the needs and personalities of your beneficiaries. It would also let you evaluate if the co-trustee is the right choice to manage the trust in your absence.
  • Evaluate your trustee candidates carefully and realistically.
  • If you are considering a professional or corporate trustee, talk to several. Compare their services, investment returns, and fees.


We can help you select, educate, and advise your successor trustees so they will have support and know what to do next to carry out your wishes. Give us a call today. 


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From our office in Gainesville, the estate planning firm of White & Crouch, P.A. advises and represents clients in communities throughout Alachua County, Marion County, Levy County, Putnam County, Clay County, Bradford County, Union County and Gilchrist County in North Central Florida. Call us at 352-372-1011 or contact the firm by email to arrange an initial consultation with us today.

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