A trustee has considerable influence over the well-being of beneficiaries and your legacy, so choosing one is a decision you should never take lightly. But who should you name as a trustee? In a perfect world, you could select a family member and trust them to handle these affairs while acting with the utmost integrity and expertise… but the world is far from perfect. Every family has dynamics that can complicate things, and few family members are financial experts. For these reasons, a professional trustee and fiduciary is the best choice.
For years, Marcia L. Campbell CPA has provided trustee services to clients like you, who enjoy the peace of mind that comes with knowing their trust is in expert and reliable hands.
Related Article: How Do You Choose a Fiduciary for the Elderly?
Should a Family Member Be a Trustee?
Many people consider selecting a family member or a close loved one, but we advise against that. While choosing a family member could be a cost-effective solution, it can do more harm than good.
Complex family dynamics and deep-rooted resentments often surface when someone has passed away or legacy and inheritance are on the line. These situations can result in long, drawn-out litigation that costs more in the long run than working with a professional does.
Common issues that arise when family members are trustees include:
- Self-dealing: Trustees cannot engage in transactions that involve self-dealing (i.e. when the trustee is the buyer and seller of trust property), such as the trustee selling or leasing trust property to themselves, borrowing trust property, or selling their property to the trust.
- Conflicts of interest: Trustees must avoid conflicts of interest, which occur when a trustee’s interests conflict with their fiduciary duties and beneficiary interests. This can be a complicated gray area, so the expertise of a neutral third party is invaluable.
- Retaining unproductive and underproductive property: Unless directed otherwise by the trust instrument, trustees must remove unproductive and underproductive property from the trust as soon as they can and invest property to make it profitable. For example, they should not leave assets in a checking account and should invest them for a better rate of return. Understanding what is underproductive can be difficult without a fiduciary’s seasoned knowledge.
- Failing to make prudent investments: Trustees must prudently invest trust assets with care, skill, and caution, meaning they have to avoid speculative investments, monitor the performance of investments, and reduce risk by diversifying investments. This requires the help of a professional financial advisor.
- Violating their duty of impartiality: Trustees must treat beneficiaries equally during administration, meaning they can’t play favorites. This is a common problem when there are intergenerational conflicts between beneficiaries or when a trustee is also a beneficiary.
- Unawareness of administrative responsibilities: Trustees have duties they are legally obligated to uphold, such as keeping robust and accurate records, but when you choose a family member to administer a trust, they will likely be unaware of these. Violating any of these duties can have severe legal repercussions and hurt the trust and beneficiaries.
Engaging in any of the behaviors listed above hurts the trust and beneficiaries, but it can also result in the removal and replacement of the trustee. Above all, however, it can have irreversible consequences on your family.
When a breach of duty occurs with a trustee who is also a family member, it can lead to fighting and a breakdown of relationships that families never recover from. And during such emotionally turbulent times, you and your family need each other more than ever.
For all of these reasons and more, an objective third party is often the best possible option to have as a trustee.
Related Article: Private Fiduciary for the Elderly: How They Work
Who Should You Name as a Trustee? Here’s What to Consider.
When choosing a trustee, choose someone you know and trust. If you can’t trust them to hold $50 for you, they are a bad choice. Your trustee should have good judgment and be inclined to respect your wishes. Some key considerations are:
- Reliability and responsibility: Your trustee has several fiduciary duties. Choose an individual who will carry out these duties professionally and responsively. Because a trustee can be held personally liable, this could expose them to risk if they lack the expertise.
- Experience and knowledge: Financial acumen is crucial to manage a trust, so you must choose someone who has experience managing assets and administering a trust, a background in finance and investments, and an extensive knowledge of probate code and how to navigate it.
- Foresight and conflict resolution: Administering a trust often comes with conflict. Choose a trustee who can anticipate and curb potential conflicts of interest or situations that could cause them to breach their duties. You also need a trustee who can manage beneficiaries and their interpersonal issues and who has enough emotional distance from you and your family to maintain impartiality.
- Availability: Being a trustee is a lot of work—it is essentially a full-time job. Choose someone who can dedicate the time, energy, and resources required to administer the trust.
You need a professional who can step in to manage your trust, potentially pay your bills if you need that support, make financial decisions that are in your best interest, and even sell or refinance assets.
“People sometimes feel hurt when they’re not chosen as a trustee, especially when it’s family, but that doesn’t mean they can’t help. Ideally, this will be a collaborative effort, and the trustee you work with will help you and your family to ensure they administer the trust per your wishes and the trust document. Naming a family member a co-trustee can be a huge help.”
– Marcia L. Campbell, Professional Fiduciary Trustee
Related Article: How Do Trustee Services in California Help Seniors Manage Assets?
Are You Searching for a Trustee You Can Depend On? Hire A Professional Fiduciary Today!
So, who should you name as a trustee? Only a professional fiduciary has the experience and expertise needed to protect your interests, your beneficiaries’ interests, and the integrity of the trust. Visit our Contact Us page to schedule a consultation with a professional fiduciary trustee to ensure your trust and legacy are in expert hands.
