When it comes to selecting a trustee, individuals have a variety of options. They can rely on a family member or friend, a business associate, or they can consult a professional trustee. In fact, any adult could serve as trustee, though it comes with significant responsibility that many people may not be prepared to handle. The following are five good reasons to select a professional trustee to protect and manage your assets.
- Experience, Experience, Experience — Selecting an investment manager, working with professionals such as attorneys and accountants, and interpreting the provisions of the trust document are just a few of the responsibilities that come with acting as trustee. Sometimes the mere pressures associated with making decisions relating to the assets of an estate or trust in addition to managing their own can be overwhelming to inexperienced trustees. Even if a friend or family member has an impressive business background and is ostensibly well-equipped to do the job, they tend to have their own priorities. This isn’t to say that they wouldn’t treat the role with respect and attention; they just may not have the time to extend the effort necessary to do the kind of job expected and deserved. Very simply, being an effective trustee is more than simply carrying out the wishes of the grantor; it’s being proactive, anticipating what needs to be done, and avoiding situations that could be costly to the family. In addition, an individual trustee facing financial difficulties may be tempted to borrow money from the trust; it happens more than one might think. While these trustees tend to have honorable intentions, the reality is that, ultimately, it may result in a loss to the trust.
- Continuity for Future Generations — When partnering with a professional trustee, grantors and their families are afforded continuity. Individuals pass away; entities do not. Oftentimes people name an accountant, lawyer, or brother or sister as trustee. Frequently they specify people of similar age. When the grantor turns 80, chances are the named individual trustee isn’t far behind. So what will happen once the grantor and trustee have died? Who will manage the trust then? Some trust documents attempt to solve the continuity problem to the extreme. We’ve seen documents with more than a dozen alternate trustees. Still, every individual is mortal; partnering with a professional trustee ensures a level of continuity that individual trustees cannot provide.
- Family Harmony — Individuals often look to family members to act as their trustees. This may not be the best solution. For example, let’s say that an individual is made trustee of his brother’s $2 million estate. The grantor’s son, who recently turned 16, wants to use trust funds to purchase an extravagant automobile. The trustee may correctly feel it’s impractical for his nephew to use trust funds for that purpose, causing a family rift. In addition, it’s not advisable to name one child “trustee” at the expense of another. However, naming all children trustees can be problematic because it creates a situation in which all family members must find the time to meet and agree on every single detail. Partnering with a professional trustee allows the wishes of the grantor to be executed without disrupting family harmony.
- Consistency — Similar to family dynamics, inexperienced trustees may make decisions over time that favorably affect certain family members. In doing so, they’re setting a precedent that other family members must be treated the same when reaching similar milestones. For example, if one grandchild is deemed deserving of a distribution of the trust when graduating high school, all other siblings will demand the same treatment. It’s crucial that all members of a family feel they’re treated fairly and consistently — something that, once again, can be achieved more easily when the trustee is a professional versus a family member or friend. It’s easier for a non-related party to be objective.
- Peace of Mind — This is, perhaps, the greatest benefit of partnering with a professional trustee. Professional trustees are subject to significant oversight. Plante Moran Trust, for example, is subject to state examination and audits and has dual controls in place to assure accountability. It has systems in place to ensure that all parties with qualified interests receive timely updates and information concerning the trust’s activity. Unfortunately, individual trustees are not held to the same scrutiny and generally aren’t organized to provide the information.
It’s easy to see why, when selecting a trustee, many people opt for friends and family members; there’s an inherent familiarity and trust. However, these individuals may be unprepared to handle a trust effectively. It’s important to take an objective look at the situation and consider experience, continuity, family dynamics, consistency, and peace of mind before arriving at a final decision. It’s true that virtually anyone could act as a trustee, but that doesn’t mean that just anyone should.