• Steve Coker, CFP

Who should I name as trustee?


Naming a trustee is one of the most important and difficult decisions when creating a trust. A trustee is the person (or business) that will be tasked with executing the instructions in the trust. And while the trust document may provide detailed instructions for the trustee, the trustee will still need to execute those decisions and use good judgement. For example, a trust may lay out instructions and authority for the trustee to ‘sell my home and divide the proceeds equally among my three children.’ Now consider all the decisions that are left to the trustee. The trustee must decide which realtor to use, whether repairs should be made, what the offering price will be, which offer to accept, and dozens of other critical decisions when selling a home. In truth, being a trustee is a big responsibility and a lot of work. Here are a few things to consider when choosing a trustee.


1. Do I trust my trustee’s ability?


Does your potential trustee have the skills and acumen needed to execute the trust? This does not mean that your trustee needs to be an attorney, or CPA, or banker, or real estate agent, or some magical combination of all of these. A trustee can consult with the appropriate subject matter experts, so a trustee does need a law degree. However, a trustee should be able to read and understand the trust, get tasks done, hire the right people and use good judgement. In my opinion, I would want to see that the trustee manages his or her own affairs well – that is a good indicator of their ability to handle the trust.


The skills needed to execute the trust may vary depending on the complexity of the trust and the trust assets. For example, if you own a small business and the trustee would be responsible for running the business while it is offered for sale, then that situation would require someone who knows the business. Similarly, if you own several rental properties or commercial properties then it may be beneficial for your trustee to have some knowledge of these assets.


2. Do I trust my trustee’s judgement?


A trustee needs more than knowledge - a trustee also needs to make good decisions and that requires good judgement. Do you trust the judgement of your potential trustee? This is not always about financial judgement. For example, sometimes a trustee is tasked with caring for a minor, or even withholding funds from adult children unless certain conditions are met. Consider what you are asking of your trustee and choose your trustee accordingly. I recognize that, especially as it relates to caring for children, it may be difficult to find someone you trust.


3. Should I have more than one trustee?


Sometimes attorneys recommend using two or more people as co-trustees, but I generally caution against using co-trustees. As a financial planner, I am often tasked with helping trustees execute the trust document. In my experience using co-trustees can lead to disagreements, slow decision making, and a lot of heartache. Certainly, there are advantages to multiple trustees. Sometimes co-trustees are named so that no one feels left out. But this approach also has the downside of requiring the co-trustees to work together and make joint decisions, which can be challenging even in the best of relationships. Sometimes co-trustees are named so that they can split the workload and use their individual skills, which can make sense. But this approach again requires coordination that can be confusing and difficult. In most cases I believe it is best to use a single trustee as decision maker.


4. Should I use a professional trustee?


Sometimes there is no individual, whether child, family member, or friend, that you can trust. In those instances, it may be time consider using a professional trustee. A professional trustee can be a costly, but it can be worth the money if it means that your assets will be handled and distributed properly. There are many trust companies ranging from small to large – local attorneys, CPA firms, and local banks sometimes have trust departments as do large institutions such as Northern Trust or Charles Schwab. Some charities will offer trust services when the charity is named as a beneficiary, an option that is often overlooked.


As you create your trust, consider which trustee will work best for your situation. It is a big decision be an important one for your future.

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