Equally as important as determining the right type of trust for you and your family is deciding who should serve as trustee. A trustee is an individual or an institution responsible for holding and administering assets for the benefit of a third party. Depending on the type of trust, the trustee could be anyone from yourself, to a trusted friend, to a professional trust company or attorney. No matter who you choose to serve in this role, it is essential to consider the responsibilities of the potential trustee and the likelihood that the potential trustee will be willing and able to carry out your intentions.
Determining the appropriate trustee begins with considering the purpose of the trust. Is the intent simply to minimize probate exposure and to distribute trust assets to beneficiaries immediately upon your death? If so, you will likely serve as the initial trustee, and you should name at least one individual or institution to serve as a successor trustee in your place. If the needs are that simple (and they frequently are not), a close family member who is sensitive to family dynamics may be an ideal candidate.
Alternatively, if the purpose of the trust is to preserve wealth and provide economic support to beneficiaries throughout multiple generations, it may be important to have a more sophisticated trustee. If you are fortunate enough to have a close friend or family member who also has the financial acumen to manage and grow trust assets, he or she may be a good choice to serve as trustee. If a person like that is not available to serve for you, you probably should consider selecting an institutional trustee, such as a bank or trust company, an investment advisor, an accountant or a lawyer. A professional trustee will have the experience required to properly manage your complex trust. Of course, a professional trustee will charge a fee (and often a family member or friend will not). The fee is often determined by a percentage of the value of the trust assets, or possibly a fixed rate based on the time dedicated to administration. Keep in mind Kurt Vonnegut’s warning: “In this world, you get what you pay for.”
Though institutional trustees have the potential to provide a great deal of technical knowledge on how to administer a trust, the individual representing the institution may not have the personal connection to your family that you desire. Communication with beneficiaries and understanding family dynamics is an important role of a Trustee. It is possible to get the best of both worlds by naming two or more co-trustees. Responsibilities can be divided among the co-trustees allowing the financially more astute institutional trustee to handle asset management, while the individual trustee manages communications with the beneficiaries.
Another type of trust worth considering is a special needs trust. The purpose of a special needs trust is typically to manage and administer finances for the benefit of a physically or mentally disabled person (often with the goal of optimizing the individual’s chances to remain eligible for public assistance). It is particularly important that the trustee of a special needs trust be familiar with the beneficiary and understand the beneficiary’s needs, while also having in-depth knowledge of disability benefits provided by Social Security, Supplemental Security Income (SSI), Medicare, and Medicaid. As finding a trustee who satisfies both of those requirements may prove difficult, combining an individual along with an institutional trustee (as discussed above) may prove to be a solution for special needs trusts as well.
Whether you are interested in creating a new trust or updating trustee selections of an existing trust, please contact any of the experienced attorneys at Chipman Mazzucco Emerson LLC.