Let's start by setting the differences between diverse types of trusts. Context may play into your decision of whom you want to name as trustee.
Suppose you're setting up a revocable living trust. In that case, you might appoint an "incapacity trustee," someone who will manage the trust if you become incapacitated. The other figure is the "death trustee," who will manage the trust upon your death. It's common to name the same trustee in both roles.
Or you could be setting up a trust for your children. In that case, you might nominate a trustee who will manage the assets until your children reach an age where they are equipped to handle it for themselves.
1. Think of someone you deeply trust.
First and foremost, the role of the trustee is financial. The trustee will manage the trust's assets following any instructions you've outlined in the trust document. You will want to name someone trustworthy, organized, and responsible. They need to be capable of handling financial matters such as bill paying and managing investments. Now, just like you can hire a financial advisor, accountant, and lawyer to provide you with advice, your trustee can seek out advice on your behalf. However, you want to name someone you feel has good judgment and will act in your best interests at the end of the day.
2. Will naming co-trustees work for you?
Many clients ask whether they should consider naming co-trustees. If you're thinking about it too, here is something to consider: will they communicate effectively with each other and work together? Otherwise, naming co-trustees that don't get along is a recipe for fighting and disaster.
When naming co-trustees, you should specify that either trustee can act independently on your behalf. In other words, they are effectively sharing the responsibility. Otherwise, it can quickly become overly burdensome if you require your co-trustees to collaborate. They will both have to agree on every action, sign every check or document, and so forth. So if you are considering requiring your co-trustees to act jointly, we strongly recommend you discuss this further with your attorney.
3. Decide whether your trustee should be local or not.
Is it essential for your trustee to be local to where you reside? These days, more and more financial matters can be handled online. So your trustee does not need to be local, but it can be helpful. For example, a local trustee may be more suitable for seeing your home's maintenance, picking up your mail, handling matters at the DMV, and similar issues.
4. Think about naming your financial agent your trustee as well.
If you're setting up a revocable living trust, there is considerable overlap between the roles of a durable power of attorney's financial agent and a trustee. Your trustee will be responsible for managing all of your assets that have been transferred to the trust, and your agent under your power of attorney will be responsible for any assets outside of your trust or things like filing your taxes.
Similarly, there are many parallels between trustee and executor. After your death, your trustee will handle the assets in your trust, and your executor will manage any assets out of your trust that must go through probate. Therefore, because there's so much overlap, most clients often name the same individuals to serve as a durable power of attorney financial agent, executor, and trustee.
5. You can name a professional as your trustee.
If you're wondering what to do if you don't have any close family members or friends you would entrust to serve as trustees, you may wish to consider naming a professional to serve as your trustee.
If you think a professional trustee might be a better fit for you, you should discuss this further with your attorney. They can help determine whether that's the best fit for you and might be able to recommend professionals that fit your needs.
If you have additional questions or need more guidance in selecting your trustees, Carolina Family Estate Planning is here to help you build a better life and plan for a secure future. Call us at (919) 443-3035 today or schedule a needs assessment call with a member of our friendly, professional legal team.
