You’ve made it to a place in your estate planning where it’s been determined that setting up a trust will help accomplish the many goals you have for your family.
You’ve done extensive research and worked with your adviser to select the type of trust that best suits your needs. Whether a trust for your grandchildren or a charitable trust, it’s time now to do what some may consider the easier part of the process — choosing your trustee.
Who do you “trust” to ensure your financial legacy lives on? Do you choose someone close to you? Someone you know respects your wishes, goals and family? Or do you choose someone without a personal connection to you or your family?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Keep in mind that choosing a trustee should be considered more of a business decision and less of a personal one. Although a trust can be perfectly designed for success, the trust’s goals may not be fully carried out when a trustee lacks knowledge, dedication or objectivity.
Personal Connections and Emotional Investments
It’s critical to understand the trustee's fiduciary responsibilities in order to make a wise choice when selecting someone to perform the duties.
Someone who is sensitive to your motivations and your beneficiaries’ well-being doesn’t necessarily possess all the essential qualities. When thinking about a trustee’s responsibilities, you should consider more than her understanding and respect for your financial goals and values.
A trustee must also play a keen part in investment management; tax planning and filing; making appropriate distributions to beneficiaries or for their benefit; and protecting the trust’s assets. On a day-to-day basis, the trustee must review beneficiaries' requests for funds and decide when to approve or deny distributions in accordance with the trust’s terms. Making this call can be difficult and stressful for someone with a personal connection to the beneficiary.
Imagine a situation where your loved one becomes less capable of handling his financial situation. Perhaps his “friends” are a negative influence. If the trustee is someone close to the beneficiary, she may want to maintain her relationship with him and be unable to tell him “no.” Relationship dynamics may play a bigger role in the individual trustee’s decisions, as opposed to what your intent was in setting up the trust.
Multiple Trustees: Too Much Tension or the Perfect Balance?
It can be difficult to choose between a personal connection and someone with many years of experience managing trusts. What if you could have both?
A corporate trustee, such as a trust company or bank trust department, provides an objective, third-party opinion solely focused on the long-term goals that you set out for your trust. A corporate trustee can serve as either the sole trustee or co-trustee of your trust. Naming a professional trustee along with a trusted friend or family member may be your answer.
In the above scenario, in which a beneficiary becomes financially irresponsible, an effective corporate trustee can employ a disciplined and unbiased approach, while also receiving the co-trustee’s direct input and personal opinion. Not only can enlisting a corporate trustee's help potentially diminish unanticipated family tension, but it also enables a sharing of fiduciary responsibilities with the co-trustee. The co-trustees must act in collaborative consultation unless the trust allows one co-trustee to act alone. It also may allow the corporate trustee to make the necessary tough decisions in this situation without doing further harm to the relationship of the personal co-trustee and beneficiary.
It is vital that you take all things into consideration when establishing the “trust.” Choosing the right trustee(s) can help ensure that not only your financial legacy and intentions will be carried out, but it will be done so professionally and objectively for your heirs’ benefit.
-
The Fall Garden 'Tax': What to Plant and How to PrepareTax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
July CPI Report Boosts Rate-Cut Odds: What the Experts SayThe July CPI report shows that tariffs are having a slight impact on inflation, though not enough to keep the Fed from cutting interest rates.
-
DST Exit Strategies: An Expert Guide to What Happens When the Trust SellsUnderstanding the endgame: How Delaware statutory trust dispositions work, what investors can expect and why the exit is probably more important than the entrance.
-
Think Selling Your Home 'As Is' Means You'll Have No Worries? Think AgainThere are significant risks and legal obligations involved in selling a home 'as is' and by yourself, without a real estate agent.
-
What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's GuideFor Americans in lower- and middle-income tax brackets, the enhanced deduction for older people reduces taxable income, shielding most of their Social Security benefits from being taxed.
-
Financial Planner vs Investment Manager: Who's the Better Value for You?When markets are shaky, who do you trust with your money? A recent study provides useful insights into the value that different financial professionals offer.
-
I'm a Financial Adviser: This Is How You Could Be Leaving Six Figures in Social Security on the TableClaiming Social Security is about more than filing paperwork and expecting a check. When you do it and how you do it have huge financial implications that last the rest of your life.
-
The Big Pause: Why Are So Many Americans Afraid to Retire?While new research sheds light on Americans' growing reluctance to quit work in later life, can anything be done to help those with the retirement jitters?
-
Five Under-the-Radar Shifts Investors and Job Seekers Can't Afford to Ignore Under the OBBBBeyond the headlines: The new tax law's true impact for job seekers and investors lies in how it will transform industries and create opportunities in areas such as regional accounting, AI and outsourced business services.
-
I'm a Financial Professional: It's Time to Stop Planning Your Retirement Like It's 1995Today's retirement isn't the same as in your parents' day. You need to be prepared for a much longer time frame and make a plan with purpose in mind.
