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Part 1: Should you choose a personal or professional trustee?

At our law firm, our work often involves trusts. We help people set up trusts during their lifetimes such as revocable living trusts and special-needs trusts. Some clients arrange for testamentary trusts that take effect at death through provisions in wills.

Our lawyers also advise trustees about how to carry out the terms of the trusts for which they are responsible and how to fulfill their fiduciary duties. Finally, an attorney at our firm may agree to act as a professional trustee.

Considerations in choosing a trustee

When someone chooses to set up a trust, one of the key decisions is whom to name as trustee and successor trustee, should the original be unable or unwilling to serve. It may be wise to appoint co-trustees, but this should be done carefully with much thought and investigation put into choosing two people who can work together. They must be able to work out disagreements over what is best for the trust assets and beneficiaries.

Family or friend as trustee

There are pros and cons to choosing a family member or friend to serve. Such a person is likely to understand the needs of the trust beneficiary. For example, if the beneficiary is a family member with a disability or who makes behavioral choices that can be problematic, the potential trustee may already have a handle on the issues involved and how trust distributions could be (or not be) in the beneficiary’s interests.

If the trustee is a family member or friend of the beneficiary, the personal relationship may increase the trustee’s level of care and concern. A relative or friend may also commit to serve without pay or at a discounted rate, which would preserve more trust assets for the beneficiary.

The flip side to these benefits is that a family member as trustee may be unable to make objective decisions. Also, care must be taken that there be no potential conflict of interest between the family trustee and the beneficiary’s interests. For example, if the trust provides that relatives (or even the trustee himself or herself) will receive any remaining trust assets when the trust dissolves, it could influence the trustee’s decision-making.

Kiplinger provides an interesting example of this kind of conflict.

In part 2 of this post, we will talk about professional trustees.

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