Tips and Recommendations for Selecting the Right Trustee

When setting up a trust to manage your wealth, one of your most important decisions will be picking the right trustee. There are many factors and considerations to weigh when selecting a trustee, including whether to nominate co-trustees or successor trustees. With the right trustee, you can gain peace of mind that your assets are managed according to your wishes.

Understanding the Role of a Trustee

Trustees have a legal responsibility to manage property held by the trust in keeping with the terms outlined by the person(s) who created the trust (called a trustor). A trustee has a fiduciary duty to the trust and its beneficiaries, including:

• Handling administrative tasks necessary to manage the trust
• Keeping records
• Managing investments of trust assets
• Communicating with beneficiaries regarding trust performance and distributions

Trustees must not act in their self-interest in managing the trust. They cannot engage in self-dealing with trust assets, misappropriating trust property, or charging excessive management fees.

Assessing Trustee Qualifications

Choosing a trustee is one of the most personal decisions a trustor will make. Many people create trusts to manage their families’ wealth, so they want to choose someone they are confident will act in their families’ best interest and with the qualifications necessary to manage the trust.

A trustor can name an individual or a corporate entity as a trustee. Potential options include a reliable family member or friend, a professional advisor like an attorney or investment broker, or a bank, trust company, or other financial institution.

Trustors should consider these factors when assessing candidates to serve as trustees:

• Responsibility and trustworthiness – A trustor should ensure that any trustee has the conscience and sound judgment to act with care in managing the trust. This means they should be able to make objective, reasonable decisions based on professional advice that further the trust’s best interests.
• Age and availability – When setting up a trust for the future, the trustor should think hard before selecting an older person or someone in ill health as a trustee since that person may be unable or unwilling to serve when the time comes. A trustor can plan for this contingency by nominating successor trustees (including a corporate trustee) or empowering a successor trustee or the beneficiaries to name a new trustee.
• Co-trustees – Consider the benefits of naming multiple trustees. For example, naming a family member and corporate trustee as co-trustees can combine personal knowledge of your family’s needs and interests with professional expertise in managing assets. Naming multiple family members can spread out the administrative burdens of managing a trust. However, naming co-trustees also comes with the risk of conflict and deadlock since co-trustees usually must agree on decisions unanimously.

Considering Family and Professional Trustees

While a trustor may favor selecting a dependable family member to serve as trustee, choosing a professional advisor or corporate trustee may work better when the trust holds complex assets. However, even when managing trust assets may require professional expertise, a trustor need not consider only professional trustees. They can name a family member to serve as trustee and authorize the family member (via the trust document) to spend trust assets to hire professional advisors as needed. A trustor could also name a professional as a co-trustee.

Communication and Transparency

A trustor can avoid future conflicts by selecting a trustee they know will communicate well and act transparently. A relative serving as trustee should have the temperament to communicate with and reasonably consider guidance from professional advisors like attorneys, accountants, or investment managers. Trusts can also avoid legal challenges from beneficiaries when the trustee maintains transparency regarding the trust’s performance and operational costs.

Get Help from Our Estate Planning Attorney

If you need help setting up a trust or selecting a trustee, an Arizona estate planning lawyer from Brown & Hobkirk, PLLC can listen to your thoughts and advise on the best course of action. Don’t hesitate to reach out to us for help in making such an important life decision. Contact us today for a free consultation*.