Choosing a trustee for your trust is an important decision. Most of my clients immediately have someone in mind. But before we get to that point, we need to discuss what a trustee actually does. Ironically, even before many clients have decided they need a trust (or don’t need a trust), they seem to have a trustee in mind. The person on the tip of their tongue is often a trusted member of the family. Occasionally, it is not a family member, but a close friend. Not surprisingly, if they have children, then the person they are considering to be the trustee is often the same person they are considering to be the guardian for their children. One client with an interesting sense of humor even told me that “Trustee” has the word “Trust” right in it! All joking aside, before you select a trustee, it’s important to understand some of the things they may be asked to do.
What Does a Trustee Do?
The short answer is:
What you tell them to do.
Your trust is unique to you and can have an infinite amount of possible things for the trustee to do. Often times, you are selecting yourself as the initial trustee. You are the one managing the trust and its assets while you are still living. But if you die or become incapacitated, then someone else (the successor trustee) has to step in and fill the role. So, what kinds of things could they be asked to do? Some common responsibilities include,
- Preparing and filing tax returns;
- Selling assets;
- Collecting money on behalf of the trust;
- Manage and invest assets of the trust;
- Protecting assets;
- Paying debts of the trust;
- Filing claims for benefits on behalf of the trust; and
- Keeping detailed financial records for the trust.
Most of these responsibilities are financial in nature because that is normally the purpose of setting up a trust. There can be a variety of financial benefits to creating a trust. In order to fully take advantage of those benefits, you want to make sure you have the right people in place.
If one of your siblings can’t hold a job down and is terrible with money and your other sibling is a successful financial advisor? Perhaps you know who would be better suited to be a trustee for you. But then again, appearances can be deceiving. In the end, it’s your trust and your choice. So choose wisely with the responsibilities of the position in your mind.