To be valid and enforceable, a trust must be funded with assets of value, and it must have a purpose. In addition, it must have a trustee. The person who legally holds the assets. When you establish your trust, you are required to nominate your trustee. While not required, I strongly recommend identifying a successor trustee. The person who steps in if the trustee is unable or unwilling to fulfill his duty. One of the most common questions regarding revocable trusts is, “How do I choose a trustee?” This post aims to give you a general idea of how to choose the person who will not only be your trustee but the executor of your will.
The trustee stands in your shoes to the extent you desire. You can give them as many or as few powers as you choose; you get to decide. And, at any time, you may revoke those powers if the trust is revocable and you are not incapacitated. Among the many powers you can grant to your trustee is the right to handle your financial affairs, e.g., collect income, pay bills and taxes, write checks, make investment decisions, buy and sell property, provide for your loved ones, keep accurate records, and generally keep things organized and in good order.
Because your trustee handles many important aspects of your life, choosing the best person is essential. Because trust and estate law is state-specific, each jurisdiction has its laws. The following are some general rules regarding who can be a trustee.
Let’s start with who can be a trustee.
- You can be the trustee of your revocable living trust. If you are married, your spouse can be a co-trustee. If you created an irrevocable trust, you could not be the trustee in most cases. Honestly evaluate whether you are the best choice to be your trustee. Someone else may do a better job than you, especially regarding your investments.
- Name someone to serve as co-trustee 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.
- You can choose an adult child. In California, a beneficiary under 18 is not legally qualified to serve as a trustee.
- A responsible and trusted friend or family member. Evaluate your trustee candidates carefully and realistically.
- A professional, such as a lawyer, CPA, or professional fiduciary.
- A corporate trustee. If you consider a professional fiduciary or a corporate trustee, talk to several and compare their services, investment returns, and fees.
Sometimes the Decision Can Be Difficult.
Oftentimes, when a client has multiple children, the grantor will make them co-trustees to avoid making one child feel left out. As a rule, I discourage that. In my opinion, it’s a recipe for disaster. Years ago, I had a client who had two kids: one was a smart and responsible business lawyer, and the second was an alcoholic and an addict. The client didn’t want the child dealing with the substance abuse problem to feel unloved. So against the advice of counsel, she insisted that her two children be co-trustees. As you can imagine, when the client became incapacitated, there was a problem.
When You Might Consider a Professional or Corporate Trustee.
Sometimes, a professional fiduciary or corporate trustee is the smart choice. Imagine you are elderly, widowed, or declining in health, and additionally, you have no children, trusted relatives, or friends living close by. Or suppose someone you might consider has neither the time nor the inclination to take on the heavy liability-laden responsibility of being a trustee. And suppose you neither have the time, desire, or experience to manage your investments. In this instance, a professional fiduciary or a corporate trustee may be exactly what you need. They have the experience, time, and resources to manage your trust and help you meet your investment goals. They generally charge a reasonable fee to manage your trust. Reasonable can be a relative term. However, it’s reasonable when you consider their experience, the services they provide, and the return on your investment.
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