A
trust is a legal relationship in which
one or more persons or entities (the
"trustee") is empowered by the grantor
(also known as the "trustor" or "settlor")
to hold legal title to property in
a fiduciary capacity and manage it
for the benefit of one or more persons
or charities (the "beneficiaries"). In
a declaration of trust, the grantor
also acts as the trustee. Probate is
typical in this situation.
The basic duties of a
trustee involve the collection, management
and investment of trust assets and
the accumulation and distribution of
income and principal to beneficiaries,
all pursuant to the terms of the trust
agreement. The duties of a trustee
will vary based on each trust's facts
and circumstances. These duties are
defined both in the trust agreement
and by law (see 760 ILCS 5/ Trusts
and Trustees Act). A trustee can be
held personally liable to the grantor
and the beneficiaries for his or her
failure to reasonably comply with these
duties.
I. Choosing
a Trustee: Choosing a trustee
requires thought and consideration.
The responsibility given a trustee
can be heavy and last for many
years. The trustee plays a critical
role in the management of the trust
assets. The trustee's job
includes focusing on accounting,
financial and tax matters. The
trustee must evaluate the needs
of the beneficiaries, exercise
good judgment to hire the right
advisors, and follow the terms
of the trust agreement.
All trusts require at least one
trustee. Depending on the type of
trust involved, the grantor may also
initially act as his or her own trustee
(as is common in a Revocable Trust).
At death, the surviving spouse, children,
a trusted friend or a professional
entity (such as a bank or trust company)
may serve as successor trustee. One
of the most important decisions in
choosing a trustee is whether to
use an individual or a professional
entity.
Many people choose a family member,
such as a surviving spouse, child,
or other relative, to serve as
trustee. The benefit is that
the family member typically has
a personal stake in seeing the
trust succeed and grow. A family
member is more likely to know the
beneficiaries and be able to make
personable decisions. Furthermore,
family members often serve without
charging a fee for acting as trustee.
However, family members may lack
the financial acumen to manage
trust assets and may need the services
of financial advisors, accountants
and attorneys in carrying out trustee
duties. This may offset or exceed
the savings derived from choosing
a family member in the first place.
Furthermore, family members may
not be able to distance themselves
so as to act as an impartial trustee.
The complexity of the trust may
also effect one=s decision in choosing
a trustee. Some trusts require
a high level of expertise to manage
the trust assets or require a lot
of time to deal with the beneficiaries,
accountants, financial advisors
and other individuals. Other
trusts are relatively straight-forward
and may not require such expertise
or substantial time. If a
trust is anticipated to last for
a long time, it is important to
choose a number of successor trustees
or to appoint people who can name
successor trustees, in the event
any of them cannot act. A corporate
trustee can usually serve for generations.
There is also the option of choosing
multiple trustees, both family
members and/or professional entities,
to handle trustee duties. Especially
if a particular duty will be difficult
for one person to handle. Each
trustee should then be able to
compliment the other, perhaps with
one trustee handling trust investments
and financial or tax issues and
another dealing with the beneficiaries,
including present or potential
conflicts between family members
and other beneficiaries. If
one chooses multiple trustees,
it is critical that a mechanism
is available in the trust agreement
to resolve disputes between the
various trustees.
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