If you plan to establish a trust to better protect your finances and your own interests, you need a trustee who will carry out the work of managing the trust in your absence. But who can serve in this role? And what should you look for in a trustee? Here are six questions you can answer to find the right party.
1. Who Is Allowed to Be Trustee?
First, learn who your state allows to serve as a trustee. While the rules are fairly loose, they do vary by state. Generally, most individuals can be named a trustee if they are past the age of majority and are legally competent to do the work. However, some state rules bar anyone from this role if they are also a beneficiary. This could preclude a number of family members or friends.
2. Does the Person Want the Job?
No matter how much you want a particular person to execute your wishes, remember that this is a job that not everyone wants to do. If the person feels forced into the position, they may not do as well at it as you want. They might not be able to spend the time needed to make the best decisions. And it could be that they know deep down they wouldn't be the right fit. Listen to your candidate's feelings on the matter.
3. Does the Candidate Know Your Wishes?
A trustee's job is to carry out your own wishes rather than theirs. This means that they must understand what your wishes and interests are. Many people want to use friends or family to serve as trustees, as these have the highest likelihood of knowing what you would want. But they may not act impartially. An independent trustee, such as a banker or lawyer, can also carry out your wishes if you communicate well.
4. Can You Pay a Trustee?
Trustees can be paid for their time and effort, but this will also take money out of the trust. Can your trust pay for the service? And if so, how much? If you want to use an independent trustee (like your accountant), you'll need to pay more for professional services. If this could deplete the trust, you may need to stick with family or friends who are willing to work for much less compensation.
5. Will the Person Be Around?
Ideally, you want a trustee who will be able to do the job for many, many years. This is particularly true for younger persons who set up a trust to care for their needs as they get older. In addition, a trust with certain ongoing stipulations will need active management for many years. Consider age as a factor, or make a plan to use a corporation, bank, or law firm who you believe will remain in business.
6. Can the Trustee Handle the Responsibility?
Finally, is the person you want to assign the right personality for the job? Trusteeship is an ongoing role that requires a person to manage money, maintain documentation, report to beneficiaries or the court, and proactively act in the beneficiaries' best interests — even in emotionally charged situations. And it could last for decades. Be sure the person is up for the task.
As you answer these questions, you will undoubtedly start to see who may or may not be right for the position of trustee. Want more help assigning trustees, using independent trustees, or communicating with your candidates? Start by consulting with an experienced trust attorney.
Donald B. Linsky & Associate PA can help. Make an appointment today to learn how.
