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.