Eric Dunner, J.D., CFP®

Eric Dunner, J.D., CFP®

Eric applies his passion for learning and problem solving in his role as a Vice President and Client Advisor at Glassman Wealth. For Eric, an important aspect of solving problems for clients is having the right tools and applying them in a way that provides positive outcomes for them and their families.

Selecting the person in charge of your trust

At the time of your passing, or possibly even before (living trust trustee), the trustee of your estate becomes legally responsible for managing trust assets and carrying out the duties you’ve set forth. Drawing up your estate documents and thinking about distribution of your hard-earned assets can be a daunting task. But some decisions are too important to delay. Understanding the definition of a trustee and their responsibilities is the first place to start.

Trustee duties can include selecting investments for brokerage assets, distribution cash/securities to various beneficiaries, distributing tangible assets and sometimes taking an even more active approach in cases of special needs. As you consider who to put in charge of your estate, here are some key factors to consider:

Competency and Trustworthiness

While it might seem like a good idea to select a family member as the trustee, the personal representative you select should be responsible, trustworthy (as the name implies), and able to make decisions without pressure from anyone else. It’s also wise to choose a trustee who is financially astute and understands the basic concepts of investing. It is very possible the trustee will hire someone to manage the investments rather than doing it on their own, but keep in mind that every decision made must be in the best interest of the trust and beneficiaries.

Independent/Corporate Trustee

As you are likely aware (and have probably experienced), it can often be difficult to separate emotions and feelings in order to achieve impartial judgment. Therefore, it might make more sense to select an independent trustee. Attorneys, accountants, and institutions (like banks) are often well prepared to assume these duties given their broad experience with these matters. Not to mention, these professionals have experience exercising a fiduciary duty, which is of utmost importance when assuming the role of a trustee.

There are a couple of downsides to consider if you opt for an independent trustee. First, this will likely come as an additional expense. Many times, attorneys and accountants bill by the hour, and depending on the complexity of your estate, this can lead to large bills (that the trust pays for). Also, these professionals may not fully understand or appreciate your family dynamic, and while this can be a double-edged sword, you may prefer someone who knows and appreciates the needs and personalities of each beneficiary.

Continuity and Stability

Based on the timeline of your trust, it’s possible that the beneficiaries will outlive the person you select as the trustee. This especially holds true if you put an emphasis on experience and knowledge when choosing your trustee. What happens when the trustee is no longer able to serve in his/her capacity?

There are 2 options to help alleviate this concern. The first involves preselecting a successor trustee, which is the person or institution that will take over the duties of the original trustee when that person is no longer able or willing to serve. All the factors listed above should also be considered when selecting a successor.

The second option is to select co-trustees. This could involve selecting 2 family members or a family member and a professional/corporation to act as trustees together. By going this route, you have the best of two minds (hopefully!) working together to ensure all duties are carried out properly. A well drafted trust can also outline the responsibilities of each of the fiduciaries, and this may work well to divide duties such as: investment management, recordkeeping, and ensuring that the needs of the beneficiaries are well considered.

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