If you are considering a trust, or you already have a trust and are planning to make some changes, it is important to give thoughtful attention to the choice of trustee. A trustee has considerable power and responsibility. With some types of trusts, the trustee must exercise significant administrative and financial skill and must be prepared to keep up with regular obligations for years.
At Jennifer Porter Law, PLLC, we can help you review all the factors that should go into the decision in your particular case, based on the type of trust and your specific goals. Every trust is different, but here are some general guidelines to keep in mind when choosing a trustee.
A Trustee is a Fiduciary
Regardless of the type of trust, the person you designate as trustee must be prepared to serve as a fiduciary. This is a legal term that sets a level of responsibility. A fiduciary has a legal obligation to act in the best interests of the trust beneficiaries and to put their needs ahead of personal needs. The role of a fiduciary requires integrity and thoughtfulness. Before taking action, someone acting as a fiduciary has to consider whether that step is something they personally want or something that best serves the trust and its beneficiaries.
Whether the trust duties will be simple and brief or intricate and long-term, the person serving as trustee must be someone you can trust.
Does the Trust Hold Complex Assets?
Another key factor to consider when choosing a trustee is the complexity of the assets involved in trust administration. If the trust holds simple assets such as residential real estate, bank accounts, and ordinary household property, then an individual with basic money management skills should be able to manage the assets and help them retain their value or distribute them in accordance with the trust terms.
If the trust contains collectibles that require a professional valuation, complex securities, commercial real estate, or other assets that require a certain expertise to manage, then it might be necessary to look for someone with specialized experience. Alternatively, if you want to designate a family member, you can find a professional advisor who can provide ongoing advice and assistance.
How Long Will the Trustee Need to Fulfill Their Obligations?
In some situations, trustees will only need to handle trust administration duties for a short time. For example, someone who is designated as the successor trustee of a revocable living trust will have short-term obligations. The successor trustee steps in after the primary trustee passes away, and they are responsible for paying final bills and distributing assets according to the terms of the trust. Once they have finished those duties, they are finished.
However, in other trust situations, a trustee may be expected to manage trust property, make reports, file tax returns, comply with state and federal requirements, and make disbursements from the trust for many years. Expecting a family member to keep up with these ongoing duties for a long period of time could place a considerable burden on them. It may be wise to work with a financial or legal professional or nonprofit trustee for ongoing management.
How Many Requirements Will the Trustee Need to Manage?
Certain types of irrevocable trusts set up for targeted purposes need to comply with specific legal requirements that can be difficult to manage without proper instruction. For instance, a special needs trust set up to provide resources to a disabled loved one is usually designed to operate in a way that does not interfere with the beneficiary’s eligibility for needs’ tested benefits such as Medicaid and SSI. However, the trustee needs to keep up with the legal requirements to prevent problems that could disqualify the beneficiary from receiving the benefits that pay for housing, food, medical care, and other necessities.
When choosing a trustee, it is important to consider the types of obligations they will need to fulfill and whether they have the skill and dedication to manage the tasks.
We Can Help You Evaluate and Choose the Right Trustee to Manage Your Trust
At Jennifer Porter Law, PLLC, we don’t just draft documents and send you out the door. We work with you to ensure that you understand what you need to do to keep your estate plans operating properly in the short and long term. We can help you select the right beneficiary for your trust and ensure that the trust is funded to fulfill the purpose you created it to accomplish.
To talk to us about setting up a trust or making changes to an existing trust in Northern Virginia or Hampton Roads, just give us a call at (571) 532-9070 or contact us online to schedule a consultation.
