The Professional Trustee: A Key to Secure and Sound Estate Management

Life is full of decisions, especially when it comes to planning your legacy and choosing who will manage your trust. With trusts being an estate planning tool utilized by many of our clients, a common question we hear is whether to appoint an individual—such as a family member or close friend—or to employ a professional trustee. To help those who may be facing this important decision, we wanted to outline the responsibilities of a trustee, discuss the risks of neglecting those duties, and highlight the advantages and disadvantages of choosing an individual versus a professional.

For many families, appointing someone close, like a friend or family member, may seem like an obvious choice. However, there’s another option worth exploring: a professional trustee, who can help to ensure your wishes are carried out clearly and effectively.

What is a trustee and what do they do?

A trustee is responsible for managing the assets held in a trust, according to the terms and guidelines of the trust document. Although being named a trustee might sound like a great honor, it often comes with complex responsibilities that can last for years.

Among the duties are:

• Managing Assets: Investing and growing trust assets prudently.
• Making Distributions: Ensuring beneficiaries receive their designated payments.
• Filing Taxes: Handling all necessary trust tax returns.
• Recordkeeping: Maintaining detailed records and providing reports to beneficiaries.
• Acting in Best Interest: Prioritizing beneficiaries’ well-being and the trust’s purpose.

These responsibilities not only require substantial commitment, but also a high level of financial and legal acumen, which not everyone possesses.  Without this specialized knowledge, an individual trustee might inadvertently face significant challenges, leading to potential missteps or even legal repercussions.

Professional Trustee

A professional trustee is an individual or company that specializes in administering trusts. It could be a corporate trustee within a bank, or an independent trustee like an attorney or fiduciary who takes on trustee roles. They bring expertise and objectivity, which may prove invaluable for many families.

There are several reasons why families might choose a professional trustee instead of a family member:

• Expertise: In-depth knowledge of trust law, investments, and tax regulations.
• Objectivity: Impartial decision-making, which can be especially valuable in families with potential conflicts or fractious relationships.
• Consistency: Unaffected by personal life changes, ensuring seamless trust management.
• Administrative Support: Access to systems and staff for efficient management.
• Reduced Family Burden: Relieves loved ones from complex administrative duties.
• Peace of Mind: Confidence that your trust is professionally managed.

It’s important to remember that both professional and non-professional trustees are typically entitled to compensation for their work, as their duties are significant and can be demanding.

Which type of trustee should I choose?

Well, that depends on your specific circumstances and family dynamics.

Consider a professional trustee if:

• You have a complex trust.
• Your trust is structured to distribute assets over a long period of time.
• You anticipate potential conflict among beneficiaries.
• You want to reduce the burden/stress on family members.
• You require continuity of trust management.

A professional trustee might NOT be ideal if:

• Your trust is simple and straightforward.
• You have someone among your family and friends who is comfortable with the responsibilities of a trustee.
• You want someone who knows the family well.

Securing Your Legacy

Selecting the right trustee is critical to ensure your legacy is managed with expertise and integrity. Whether you’re in the process of establishing a new trust or considering updating your existing estate plan, understanding the nuances of your possible choices is crucial. We encourage you to explore your options thoroughly; let us know if you would like to discuss which path best aligns with your wishes and provides the most secure management for your estate.

*Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S.