When You Should Hire A Professional Trustee

Posted on Friday, March 31, 2017

One of the most vital decisions to ensure preserved legacy and proper estate execution is electing the right professional or family trustee for investing and properly distributing your estate.

Desirable characteristics of a trustee include being well-organized, well-rounded, and functionally capable of administrating your trust as provided by the document, and having a clear history of integrity concerning investment and legal issues.

Whether or not the family member named as the trustee is willing and capable of undertaking the long-term responsibility necessary to manage your trust assets is a big consideration. Family members can always hire a tax professional, lawyer, estate professional, or financial planner to assist them.

However, you should still be confident that the selected trustee has the sufficient financial skills and the right temperament to make quality decisions that will best benefit the well-being of your family. Most estate experts favor designating trusteeship to an adult child or spouse, just so long as there's a cordial family dynamic and the relative shows financial competency.

Aside from financial know-how, common reservations frequently involve the health of potential trustees, as well as rivalries or conflicts among primary family members. These reservations may spur concern beyond whether the potential trustee has the knowledge of applicable financial matters, and create questions of whether potential trustees have the emotional stability and diplomacy skills to serve as sole trustee of your estate. In the event that you have even the slightest reservation about fully trusting a family member to solely execute your estate, you might consider obtaining the services from a professional trustee.

Name a Successor Trustee

If your trustee dies, becomes incapacitated, or decides he/she doesn't want to serve as trustee, you should have a successor trustee named — or at least describe how one should be selected, such as through a majority vote of the beneficiaries.

The following considerations information might be helpful for those considering pursuing a professional trustee, such a professional advisor, corporate fiduciary or a bank:

Select a Professional Trustee for Complex and Larger Estates. Most people are usually more likely to name a family member as a trustee in cases where their estate is small and financially simple. On the other hand, people with a large or financially complicated estate that's difficult or overwhelming to administer are more apt to benefit from utilizing a professional trustee with the necessary skill, knowledge, and time needed to properly manage the complex interpersonal, tax, and investment issues of the trust. 

Consider a Professional Trustee if Family Members Lack Good Dynamics And Financial Skills. Evaluate the dynamics of your family and the financial skills of potential trustees in relation to tax management and securities. You might find that potential familial trustees lack the ability to carry out the provisions and terms of the trust in a manner that would best suit the needs of the beneficiary, such as in minimizing estate and income taxes and investing funds for a maximum return. If you lack confidence that your family members can get along or oversee the trust in a manner that best benefits your named beneficiaries, you might consider naming a family member as a co-trustee to a professional trustee — or naming a professional trustee as sole trustee.

Choose a Trustee Based Off the Intent And Purpose of Your Trust. Evaluate the intent and purpose of your trust, assess professional fees, and choose a professional trustee accordingly. For example, a trust with an objective to oversee asset distribution to minor and young children, might be best accomplished under a professional trustee that is keen and flexible to the evolving needs of the trust. Another consideration might be having a professional co-trustee serve as a check-and-balance system for decision making in larger estates and trusts that involve a blended family dynamic.

In closing, keep in mind that professional trustees are generally accompanied by an annual fee, most often based on the specific responsibility of the trustee and a percentage of the trusts' value. That said, choosing an appropriate professional trustee may give you the peace of mind that your estate or trust will be handled with care and knowledge. Consult with your attorney about whether or not this is appropriate in your situation.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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