A trust can be added to an estate plan to protect assets from probate, estate taxes and debt collectors. Assets in a trust are managed by a trustee, and it’s critically important to make sure that you choose the right party for that role.
Before choosing your trustee, you may want to learn more about what a trustee does and what qualities they should have. Here is what you should know:
What does a trustee do?
A trustee is typically responsible for managing and distributing funds to a trust’s beneficiaries according to the terms of the trust. A trustee’s fiduciary duty can include monitoring trust investments, avoiding conflicts of interest, disclosing any information about the trust to beneficiaries and generally managing the funds or investments to the best of their ability. Most importantly, a trustee has a fiduciary duty to act in the best interests of the trust and its beneficiaries.
What qualities should a trustee have?
A trustee can be a family member, close friend or professional accountant. However, that does not mean just anyone should be the trustee of your trust. You want to choose someone with:
- The practical skills to handle the administrative details of the trust: Keeping records, paying bills, tracking funds, making investments and meeting deadlines are all part of the job. Your chosen trustee should either have the skill to manage these details or be willing to hire the appropriate advisors, accountants or assistance.
- The personal qualities you expect: You clearly want your trustee to be honest, impartial and fair, but they should also be good at communication and capable of avoiding conflicts with the beneficiaries.
- The time and ability to perform the role: Your chosen trustee should be geographically available and have the time and energy necessary to do the work.
Sometimes, there is no family member or friend that meets the criteria for a good trustee. In those situations, it may be necessary to hire a professional trustee.
Before drafting a trust, you may want to reach out for professional legal guidance to learn about your legal options.