How to Choose a Trustee

Trust"With so many estate plans being built around trusts, selecting the right trustee is a key decision."

Implementing a trust can be an indispensable estate planning tool. There are a number of reasons to incorporate trusts as part of your estate plan, says a recent article in Wilmington Business, "Selecting the Right Trustee." These include privacy, avoidance of probate, full management of personal finances, monitoring of investments and tax planning, and some tax-saving techniques for trusts.

Selecting the right trustee to execute your plans is just about the most critical decisions you can make—maybe even as important as the terms of the trust itself. Think about these qualifications when selecting your trustee:

  • Administrative Skills and Knowledge. Your trustee must perform a lot of different tasks, like safeguarding assets, collections, reinvestment and distribution of income, document interpretation, bill paying, and many others.
  • Investment Expertise. He or she has to put together an investment program that satisfies the requirements of all the trust beneficiaries. In today's changing and volatile investment environment, this is a big responsibility.
  • Tax and Accounting Skills. A trustee is required by law to maintain detailed and accurate records, as well as to submit reports to the trust beneficiaries, the probate court, and the IRS. In addition, he or she has to assist with decisions that will have the most beneficial tax results for the trust and beneficiaries.
  • People Skills. A trustee must be able to cultivate a strong relationship with both the creator of the trust and the beneficiaries to serve as a trustworthy financial adviser. Communication among all parties is important so that the stated trust purpose and needs of the beneficiaries are met.
  • The most important qualification for a trustee is to abide by his or her fiduciary duty and keep high business standards. A trustee is expected to be loyal and treat each beneficiary fairly and impartially.

People automatically turn to a close friend or relative as their choice of trustee. However, you need to ask yourself, "Will he or she meet all the qualifications I require my trustee to perform?" In many instances, that go-to person may not be in the best position to carry out the duties necessary to be an effective trustee. In that case, talk with your estate planning attorney for suggestions on the right trustee.

Reference: Wilmington Business (December 15, 2015) "Selecting the Right Trustee"


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