If you plan to establish a trust and include that trust in your estate plan, one of the most important decisions you will need to make during the creation of the trust is the choice of Trustee. It can be tempting (and easy) to simply choose someone close to you as the Trustee without considering whether that person is really right for the job. To help prevent you from making this common mistake, the Vero Beach trust attorneys at Kulas & Crawford offer some tips for choosing the right Trustee.
Trust Basics
A trust is a legal arrangement where one party holds property for the benefit of another party. The person who establishes the trust is known as the “Settlor,” “Trustor,” or “Grantor.” The Settlor transfers assets to a “Trustee” who is appointed by the Settlor. The Trustee is responsible for managing and safeguarding the trust’s assets for the benefit of the trust’s beneficiaries, who are also designated by the Settlor.
Trusts can be categorized into two main types: testamentary trusts and living trusts. A testamentary trust is created through a provision in the Settlor’s Will and takes effect upon the Settlor’s death. On the other hand, a living trust becomes active once all the necessary formalities of creation are completed, and the trust is funded during the Settlor’s lifetime. Living trusts can further be classified as either revocable or irrevocable.
What Does a Trustee Do?
The Trustee’s primary responsibilities involve managing the trust’s assets and administering the trust according to the terms created by the Settlor. The Trustee is typically required to invest the trust assets adhering to the “Prudent Investor Standard” which mandates that the Trustee exercise greater care and diligence with trust assets than they would with their personal assets. Furthermore, the Trustee must maintain communication with the beneficiaries, handle the distribution of assets, keep accurate records of all transactions, and ensure that any taxes owed by the trust are paid in a timely manner.
Tips for Choosing Your Trustee
It can be tempting to just name a spouse, family member, or close friend as your Trustee because you trust them. While trust is certainly an important consideration when choosing your Trustee, it should not be the only consideration. The following tips may help you make the right choice when appointing a Trustee:
- Relevant Experience and Skills: A capable Trustee should possess relevant experience and skills, particularly in managing investments and understanding trust administration laws.
- Respecting Your Wishes: The chosen Trustee should be someone who respects your wishes and is committed to fulfilling the trust’s purpose, even if they may not entirely agree with it.
- Avoiding Conflicts: Ensure the Trustee does not have any conflicts of interest with the beneficiaries to maintain a neutral and unbiased approach to trust administration. This is a common problem when a family member is appointed to be a Trustee.
- Conflict Resolution Skills: A Trustee who is skilled in conflict resolution can handle potential disputes among beneficiaries effectively, minimizing the need for costly litigation.
- Willingness and Ability to Serve: Never assume that someone will agree to serve as your Trustee. Instead, have a candid conversation to ensure they are willing and able to take on the responsibilities involved in serving as a Trustee.
Do You Need Help Choosing the Right Trustee?
To learn more, please join us for an upcoming FREE seminar. If you need help choosing the right Trustee for your trust, please contact an experienced Vero Beach trust attorney at Kulas & Crawford by calling (772) 398-0720 to schedule a consultation.
