A trustee – the person whom you put in charge of a trust’s assets – has what is called a fiduciary duty to the beneficiaries of the trust. They must be loyal and prudent, always act in good faith with the beneficiaries’ best interests in mind and adhere to confidentiality standards.
This role (while similar to that of a personal representative named in a will) can become quite demanding and is ongoing. A trustee must not only deal with the legal administration of a trust, they must also consider the human element – managing emotions, navigating family dynamics and understanding when to say no. Who should you choose to take on this responsibility?
A family member
Many people default to designating a family member – such as a spouse or child. There are benefits to this. They probably know you, your motivations and your goals as well as anyone. They also likely have a solid understanding of the family dynamics. This knowledge can be quite helpful.
There are potential downsides, however. Maybe they’re too close to the situation and unable to act impartial. This could also lead to jealous spats, particularly if a beneficiary feels the trustee is favoring others. In some cases, a trustee might also begin to feel emboldened, and stray from your original intentions.
An attorney or accountant
Naming an attorney or accountant as your trustee is possible, though in some cases there may be conflict of interest concerns. They are familiar with the legal responsibilities that come with the role, and will likely be aware of any applicable changes to law in the future. In addition, if you have worked with them in the past, they may have some familiarity with your family situation – but be far enough away as to remain impartial, avoiding any emotional pitfalls.
A corporate trustee
For situations in which you want strict oversight because you know beneficiaries do not get along, a trust company or bank can be a good option. They will handle all trust administration while remaining a neutral third-party, sticking to the trust guidelines you laid out and not letting emotions taint decision-making.
It is possible to choose more than one trustee, splitting specific responsibilities between parties based on their strengths. For example, maybe you trust one of your children to oversee certain day-to-day care aspects of a special needs trust, but you would like an accountant or trust company to have control over larger spending decisions. You might also designate a back-up trustee in order to account for changes in the situation.
Which option is best? There is no universal correct answer. It depends entirely on your unique situation. Take your time. It’s a decision worth getting right.