How to Choose a Trustee
When you establish a trust, you name someone to be the trustee. A trustee's duties include collecting income of the trust, paying the trust's bills and taxes, and investing the trust assets. The trustee is also responsible for ensuring your wishes and directions set forth in the trust are followed. Typically, you, as the person establishing the trust, are the trustee of your own revocable or living trust while you are living and able to do so. There are several factors to consider when choosing who to act as trustee in the event of your death or incapacity.
The Key Takeaways
You can be trustee of your revocable living trust. If you are married, your spouse can be co-trustee.
Even though you may be allowed to be your own trustee, you may not be the best choice if you are not actively managing your own finances.
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.
Who Can Be Your Trustee
If you have a revocable or living trust, you can be your own trustee. If you are married, your spouse can be trustee with you. This way, if either of you become incapacitated or die, the other can continue to handle your financial affairs without interruption. Most married couples who own assets together, especially those who have been married for some time, are usually co-trustees.
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 (i.e., a bank trust department or professional 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 your trustee should you change your mind.
When to Consider a Professional or Corporate Trustee
You may be elderly, widowed, and/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. Also, certain irrevocable trusts will not allow you to be trustee due to restrictions in the tax laws. In these situations, 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.
What You Need to Know
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 the people you are considering to act as trustee. C
Consider naming someone to be co-trustee with you now or later in life. 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.
If you are considering a professional or corporate trustee, talk to several. Compare their services, investment returns, and fees.
The attorneys at Ward & Oehler 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 at (507) 288-5567 if you are interested in learning more about estate planning and trusts.
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