Choosing a Trustee

Picking a trustee gets less attention than choosing your new smartphone.  In the first place, it is not a fun moment.  You and/or maybe your spouse are sitting with your estate planning lawyer.  You are planning what happens when you pass away.    For engineers and math people this is a logical emotional process.  For everyone else it is a winding road of emotions and what-ifs.  To sum up, in your Will or separate trusts you have to pick a few positions.  In your Will you need to pick an Executor, Guardian (if you have kids), Beneficiary and a Trustee.  If you have a revocable or irrevocable trust you will need to pick a Trustee and Beneficiary.  In short, picking a trustee is really important.  They control everything.

A trustee follows the rules of the trust document.  A trust document creation occurs in your Will when you pass away and/or in a separate trust document while you are alive.  In any event, picking a trustee is a must.  A trustee has a ton of power such as:

  • how much and when people get money from the trust
  • permitted investments in the trust
  • protect trust assets from bad people
  • other complex trust accounting and administration rules

You have two options for picking a trustee – an individual person or a trust company.  There is not a perfect trustee answer.  So without delay, a few big differences between a person and a trust company as trustee:

  • An individual person normally does not but can charge a fee as trustee.  A trust company charges a fee everytime.  In that case, individual person makes better choices.
  • A person can steal trust assets.  A trust company has huge checks and balances and insurance.
  • A person can play favorites with beneficiaries.  A trust company legally can not.
  • A person will age and get sloppy with the trust rules.  A trust company never ages.
  • Trust rules, such as taxes and legal stuff, change.  A person’s focus is not on those changes. A trust company’s focus is on those changes.
  • Most people do not manage money well.  Some trust companies do and some do not.  After all, we do not manage the investment assets of the trust.  The majority of corporate trustees do manage the investment assets of the trust. In the end, who do you want managing the trust assets – independent financial advisor or a trust company? We believe people want the flexibility and freedom of a picking who manages the investment assets of a trust such as a financial advisor.

Picking a trustee means making many assumptions about the future.  Giving checklists and the pros and cons of an individual trustee versus a corporate trustee makes choosing a trustee easier.  You get to decide which is best for you.

This information is not intended to be tax or legal advice, and it may not be relied 
on for the purpose of avoiding any federal tax penalties. You are encouraged to seek 
tax or legal advice from an independent professional advisor.