One of the many important decisions to make when constructing an estate plan is determining who will serve in the role of trustee. Because a trustee will have control over assets, typically for many years, choosing the wrong trustee can thwart even the most diligent estate planner’s best laid plans.
You can build the greatest and strongest castle in all the land. However, if you leave it to a guard who forgets to lock the gate, then those strong walls won’t do you much good. Trusts work pretty much the same way. Even the most carefully crafted trust is hobbled, counterproductive or even broken by leaving the wrong trustee in charge. How do you make sure you leave the trust in the right hands?
Picking a trustee can be a very difficult task. It is not the same as crafting words to paper – ink is cheap in a certain sense – because picking a trustee means picking the right person. You have to read people well and know the right people (or financial institutions) to pick. Financial Planning recently offered a few principles well worth mulling over if you’re in the process of creating a trust, in an article titled “Selecting a Trustee? 3 Factors to Consider.”
Factors one and two are useful foils: “think twice before naming children” and “consider using a professional.” There are definite trade-offs to consider with the aforementioned factors; a family member turned trustee is certainly wedded to the project and the well-being of the family. On the other hand, a professional is detached and doesn’t have the emotional investment. Of course, a professional is detached for good reason. Depending upon the complexity of the assets in a trust, correctly managing them can require a special skill-set that is more likely to be found in a professional. Finally, and regardless of whom you put in charge, remember that the trust itself can be built to include the power to remove a trustee. Depending upon whom you select as trustee, and who are designated as beneficiaries, it may be critical to strengthen the section of the trust that ensures the “power to remove”, either to protect the trustee OR to ensure that the trustee can be kicked out, if necessary.
Finding a trustee is always a bit of a balancing act, but it is a necessary one. The purpose of the trust itself is to ensure there is a legal device carrying out your wishes, to hold your assets and protect your beneficiaries as you would do so yourself. So, when you build the castle, with whom will you leave the keys?
Reference: Financial Planning (May 29, 2014) “Selecting a Trustee? 3 Factors to Consider”