When you establish a trust, you nominate someone to be the trustee. If you are creating a revocable living trust, you will likely be the initial trustee. You will also want to name successors or backup trustees to step in and manage the trust’s affairs if you can no longer manage the trust yourself. The trustee is in charge of managing the trust’s accounts and property. Specific duties can include collecting income, paying bills and taxes, making investment decisions, buying and selling property, providing money for you (during your lifetime) and your loved ones according to the trust’s instructions, keeping accurate records, and generally keeping things organized and in good order.
As previously mentioned, you can be your own trustee if you have a revocable living trust. If you are married, your spouse can be a co-trustee. If either of you cannot manage your affairs or dies, the other can usually continue to handle your financial affairs without interruption. Most married couples who own accounts and property together, especially those who have been married for some time, usually elect to serve as co-trustees.
However, you do not have to be your trustee. Some people choose an adult child, trusted friend, or relative to serve in this capacity. Some individuals prefer a professional or corporate trustee (e.g., a bank trust department or trust company) due to their experience and investment skills. Nominating someone else to serve as trustee or co-trustee of your trust does not mean you lose control. The trustee you nominate must follow the instructions within your trust and may ultimately report to you. In many cases, you can even replace your trustee if you change your mind or the arrangement is not working out how you had imagined. The key task is to choose the initial trustee wisely.
A professional or corporate trustee is valuable in several instances. You may feel as though you are not able to serve as trustee for a variety of reasons. Suppose you are elderly, widowed, or in declining health with no children or other trusted relatives living nearby, and your other potential candidates may lack the time or ability to manage your trust. In that case, a professional trustee may give you peace of mind that your affairs are handled appropriately. Or, you may simply not have the time, desire, or experience to manage investments by yourself at any age or health status. Also, certain irrevocable trusts may not allow you to act as a trustee due to tax law restrictions. In these situations, a professional or corporate trustee may be precisely what you need: they have the experience, time, and resources to manage your trust properly and help you meet your investment goals. Thus, it might be prudent to choose the initial trustee from a professional or corporate background.
Professional or corporate trustees will charge a fee to manage your trust. Usually, the fee will be based on the value of the trust’s accounts and the property they will manage. Although these fees can be high, you may consider them worthwhile, especially considering their experience, quality of services, and investment returns a professional trustee can deliver.
We can help you select, educate, and advise your successor trustees so they will have support and know what to do next to fulfill your wishes. Book a Free Discovery Call.
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