Although your Last Will and Testament likely serves as the foundation for your estate plan, if you create a comprehensive estate plan it will include a wide range of additional estate planning tools and strategies that are used to accomplish related goals and objectives. One of the most common additions to a well-rounded estate plan is a trust. A trust can help you achieve numerous estate planning goals, including asset protection, incapacity planning, probate avoidance, and long-term care planning, among others. No matter which type of trust you choose to include in your estate plan, you will need to appoint someone as the Trustee to administer the trust. Do not make the common mistake of appointing a Trustee without a thorough understanding of the duties and responsibilities that go along with trust administration.
Trust Basics
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. All trusts require the following five elements for creation:
- Settlor – the person who creates the trust. A Settlor may also be referred to as the Grantor or Maker of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary – a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets.
- Terms – created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding – almost anything of value can be used to a fund a trust, including cash, securities, and real property.
Don’t Make a Common Mistake
In general, the Trustee’s job is to oversee the administration of the trust and manage the trust assets. One of the biggest, and most common, mistakes people make when establishing a trust is to name a spouse, close friend, or family member as the Trustee of their trust without really giving the matter sufficient thought. Instead, people frequently operate on the mistaken assumption that if the individual is someone they trust, the person will make a good Trustee. Unfortunately, that mistaken assumption often results in a Trustee who is unprepared and unqualified to successfully administer the trust. That is not to say that a spouse, friend, or family member cannot be your Trustee; however, make sure they are actually the best-qualified candidate before making that decision.
Questions to Ask Yourself When Appointing a Trustee
When you sit down to think about who to appoint as the Trustee of your trust, it helps to have some questions in mind with which to evaluate candidates. You may have additional questions that cover unique concerns you may have, but the following general questions should get you started:
- Does the individual have experience and/or education in the legal or financial field? Many of the tasks of a Trustee involve understanding complex legal and/or financial concepts. Ideally, your Trustee should have prior experience in one, or both, fields and/or a working knowledge of the concepts involved.
- Is the individual available to serve as your Trustee? This may seem obvious, but people often fail to discuss the appointment with their intended Trustee. When it comes time to administer the trust, the individual does not have the time, has moved away, or has personal/medical issues that prevent him/her from fulfilling the duties of a Trustee.
- Is the individual willing to serve as your Trustee? Never assume that someone is willing to take on the job of Trustee, even if they are a family member or close friend. It is a big job and may be too much for some people. Always sit down and discuss the position with a prospective Trustee before appointing someone as your Trustee.
- Does the individual have any conflicts with trust beneficiaries? Appointing a family member can create conflicts if the beneficiaries of the trust are also family members, particularly if the Trustee has discretionary powers under the terms of the trust.
- Does the individual live close? If you include real property among the trust assets, it is best to appoint a Trustee who lives close enough to keep an eye on the property instead of relying on someone else to do so.
- Does the individual have any experience with conflict resolution? If not, do you feel that he/she would be good at resolving conflicts? Conflict among the beneficiaries of a trust is common. Appointing a Trustee who is skilled at conflict resolution will often result in avoiding costly litigation.
Contact Trust Administration Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about who to appoint as the Trustee of your trust, contact the experienced trust administration attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
