How to Choose the Initial Trustee of Your Trust

When you establish a trust, you nominate someone to be the initial trustee. If you are creating a revocable living trust, you will likely be the initial trustee. You will also want to name successors or backup trustees to step in and manage the trust’s affairs if you can no longer manage the trust yourself. If you are creating a trust in your will, then you name who that initial trustee will be after your death.

The trustee is in charge of managing the trust’s accounts and property. Specific duties can include collecting income, paying bills and taxes, making investment decisions, buying and selling property, providing money for you (during your lifetime) and your loved ones according to the trust’s instructions, keeping accurate records, and generally keeping things organized and in good order. Depending on the assets in the trust and the needs of the beneficiaries, serving as a trustee can be a lot of work.

Key Takeaways

• You can be the trustee of your revocable living trust. If you are married, your spouse can be your co-trustee.
• Most irrevocable trusts do not allow you to be a trustee.
• Even though you can be the trustee, you may not always be the best choice.
• You can choose an adult child, a trusted friend, or a professional or corporate trustee to act as trustee.
• As a trustee, you can hire certain individuals or professionals to assist you or any successor trustee in managing your trust.
• Naming someone else to be a co-trustee with you helps your co-trustee become familiar with your trust, allows your co-trustee to learn firsthand how you want the trust to operate, and lets you evaluate your co-trustee’s abilities. As a practical tip, if you decide to add a co-trustee, you may want to talk to your banks and other financial institutions to learn their co-trustee policy. Some do not like to work with co-trustees in general, while others require that the terms of the trust state that each co-trustee can act independently of each other (rather than requiring both co-trustee’s signatures or authorization for all acts on behalf of the trust).

Who Can Be Your Initial Trustee

As previously mentioned, you can be your own trustee if you have a revocable living trust. If you are married, your spouse can be a co-trustee. If either of you cannot manage your affairs or dies, the other can usually continue to handle your financial affairs without interruption. Most married couples who own accounts and property together, especially those who have been married for some time, usually elect to serve as co-trustees.

However, you do not have to be your trustee. Some people choose an adult child, trusted friend, or relative to serve in this capacity. Some individuals prefer a professional or corporate trustee (e.g., a bank trust department or trust company) due to their experience and investment skills. Nominating someone else to serve as trustee or co-trustee of your trust does not mean you lose control. The trustee you nominate must follow the instructions within your trust and may ultimately report to you. In many cases, you can even replace your trustee if you change your mind or the arrangement is not working out how you had imagined.

When to Consider a Professional or Corporate Trustee

A professional or corporate trustee is valuable in several instances. You may feel as though you are not able to serve as trustee for a variety of reasons. If you are elderly, widowed, or in declining health with no children or other trusted relatives living nearby, and your other potential candidates may lack the time or ability to manage your trust, a professional trustee may give you peace of mind that your affairs are being handled appropriately. Or, you may simply not have the time, desire, or experience to manage investments by yourself at any age or health status. Also, certain irrevocable trusts may not allow you to act as a trustee due to tax law restrictions. In these situations, a professional or corporate trustee may be exactly what you need: they have the experience, time, and resources to manage your trust properly and help you meet your investment goals.

What You Need to Know

Professional or corporate trustees will charge a fee to manage your trust. Usually, the fee will be based on the value of the trust’s accounts and property they will manage. Although these fees can be high, you may consider them worthwhile, especially considering their experience, the quality of the services provided, and the investment returns a professional trustee can deliver.

Actions to Consider in Choosing Your Initial Trustee

• Honestly evaluate whether you are the best choice to be your own trustee. Someone else may do a better job than you, especially with regard to investing your money. However, if you choose to be the trustee of your own trust, you can still hire financial advisors to assist you in making the right investment choices. You do not have to do everything yourself.
• Depending on your situation, it may be a good idea to nominate someone to serve as co-trustee with you now. This eliminates the time a successor would need to become knowledgeable about your trust, your accounts and property, and your beneficiaries’ needs and personalities. It would also allow you to evaluate whether the co-trustee is the right choice to manage the trust in your absence.
• Evaluate your trustee candidates carefully and realistically. Some may assume that their oldest adult child would make a good trustee. Unfortunately, birth order may not accurately indicate financial management skills.
• If you are considering a professional or corporate trustee, talk to several and compare their services, investment returns, and fees.

We can help you select, educate, and advise your successor trustees so they will have support and know what to do next to fulfill your wishes. Give us a call today.