Putting “trustee removal” powers into a trust can reduce the risk that a trustee will prove to be unsatisfactory. Image: RAGMA IMAGES/Shutterstock.com
By: FEDweek StaffIf you decide to leave assets in a trust for your beneficiaries, consider your designation of trustee carefully. The most important person in the trust framework is the trustee, the one responsible for managing trust assets.
The trustee holds property for one or more beneficiaries. The trustee is the one who handles all the necessary paperwork and sees that tax returns are filed.
Trust law creates a fiduciary responsibility under which the trustee is accountable to the trust beneficiaries, and must serve the beneficiaries’ best interests.
Bearing that in mind, your choices include:
Individual trustee: A friend or relative probably will be familiar with the parties involved and may well make the decisions desired by you, the trust creator.
Institutional trustee: Your local bank or trust company might have the resources to manage money and the staying power to handle long-term trusts.
To get the best of both worlds, consider naming an institution and an individual as co-trustees. You may get financial expertise and personal attention. If discretionary decisions are permitted, you can direct that both co-trustees must agree.
Putting “trustee removal” powers into a trust can reduce the risk that a trustee will prove to be unsatisfactory. A majority vote of adult income beneficiaries may be sufficient for a substitution; the new trustee or co-trustee must be an unrelated person or institution.
Whenever you name an individual as trustee or co-trustee, be sure the person is qualified to do the job, then get his or her consent. Name a successor trustee, too, in case your first choice is unable or unwilling to serve.
Choosing and assigning a trustee is a crucial step in estate planning and ensuring the proper management of assets and affairs.
In sum, here are some key steps to consider when selecting and assigning a trustee:
Identify Your Needs: Assess your specific needs and goals for selecting a trustee. Consider factors such as the complexity of your estate, the level of expertise required, and the level of trust and confidence you have in the individual or institution.
Evaluate Experience and Expertise: Look for candidates with experience and expertise in managing financial matters, legal knowledge, and familiarity with relevant regulations and tax laws; and of course vet them carefully.
Availability: It’s the best ability. Ensure that the prospective trustee has the capacity and availability to fulfill the responsibilities of the role. Are you going to be just another account in a system, or is someone going to focus on your needs.
Communicate and Discuss: Meet with them, talk to them, make sure you are in alignment – put in the effort to find the right fit, rather than finding out later it’s not a good fit.
Document the Appointment: Once you have chosen a trustee, formalize the appointment by documenting it in your estate planning documents, such as your will or trust. Clearly outline the trustee’s roles, responsibilities, and any specific instructions or limitations.
Periodic Review: Regularly review and update your trustee appointment as circumstances change or if you need to make adjustments to align with your evolving needs and preferences.
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