Far too many people delay or avoid estate planning.
Dealing with end-of-life issues may be the last thing on your to-do list, even though you know it can help protect your wealth, preserve your legacy, and minimize estate taxes. You also might be hesitant because you know you need a trust, which means you must name a trustee.
Selecting a person or corporation to carry out your wishes and distribute your estate to your beneficiaries is a big decision, one of the most important financial calls you’ll make in your lifetime. It shouldn’t be taken lightly, so any resulting anxiety is understandable.
Fortunately, the experienced financial advisors at Good Life Morehead City can help you start off your estate planning on the right foot. Here’s some guidance on how to choose a trustee for your estate plan.
What Is a Trustee?
Whoever you designate as trustee in your estate plan will be legally obligated to manage the trust according to your wishes and act in the best interests of your beneficiaries. A trustee can be an individual or a corporate entity (banks and trust companies), or you can designate co-trustees and have a combination of the two.
The trustee must act as fiduciary and has several responsibilities, including:
- Protecting the assets of the trust
- Keeping records of transactions and distributions
- Filing reports
- Making decisions
- Investing trust assets
- Communicating with beneficiaries
Being a trustee is a major commitment, so it’s important to name someone you can count on to manage your trust well. It’s also a matter of accepting risks — your beneficiaries can sue your trustee, and your trustee can be held liable for mismanagement if a judge finds that the trustee didn’t act appropriately.
What to Look for in a Trustee
Your trustee will oversee your bank accounts, pay your bills, collect rent, and perform any other tasks you specify in your trust document. While you might not need a financial professional to act as a trustee, you want someone you can trust to make good decisions and do the right thing.
When considering who will manage your affairs and look out for your loved ones, it’s vital to choose someone who has integrity, prudence, and leadership.
Your trustee must be impartial, accountable, and able to communicate well. They also need to be able to administer the trust for as long as necessary, meaning you must look for someone who can maintain the commitment for years.
Choosing an Individual Trustee
When putting someone in charge of everything you own, you naturally want someone who understands your goals and values (and ideally knows your family well). You might turn to a family member, trusted friend, or long-time business associate.
The benefit of this approach is that you’ll put in place someone who knows your background and has insight into your intentions. The downside is that selecting someone close might create a rift in the family, leading to squabbles over your assets.
Family members or longtime friends might not possess the skills needed to run the trust, or they might not be willing to accept the responsibility and commitment.
Choosing a Corporate Trustee
If you can’t find someone who possesses the qualities and skills needed to manage your trust, you can take advantage of professional expertise by designating a corporate trustee.
Corporate trustees have ample experience operating trusts and have the resources — attorneys, accountants, tax professionals, investment managers, etc. — to properly manage your trust.
These professionals also understand their fiduciary responsibility and are more likely to be objective and unbiased about the decisions they make for the trust. They’ll also take the time to discuss your goals and desires so they can better understand what you value.
Choosing Co-Trustees
Alternatively, you might decide that the best approach is to select co-trustees, pairing someone you know well and trust with a corporate trustee. This can relieve some of the burden of the commitment that might cause a family member or friend to reject the position. It also allows you to spell out who makes what decisions.
Naming a Trust Protector
While deliberating about your trustee, you also might consider naming a trust protector, an intermediary between the trustee and your beneficiaries.
Basically, you select a trustee to manage your trust according to your preferences, and a trust protector keeps an eye on the trustee to guard against actions or decisions that aren’t in your beneficiaries’ interests.
Start Your Estate Planning the Right Way
Now that you know your choices and understand some of the key considerations in choosing a trustee, you may feel better prepared to discuss end-of-life issues. If you’re ready to talk about estate planning, we invite you to schedule a no-obligation talk with a compassionate financial advisor at Good Life Morehead City.