You will have at least one person (if not multiple people) involved in the disposition of your assets in your estate plan. This could be the executor of your Last Will and Testament, Health Care Directive agent, or trustee. The job of a trustee is multifaceted and is not for everyone, but the position is vital for countless estate planners and beneficiaries. Without an effective trustee, your assets might not go to your beneficiaries the way you want them to. So, what should you look for in a trustee?
At First, the Settlor Might Be the Trustee
Living trusts are trusts that allow the creator of the trust (the settlor) to maintain control of the assets contained in the trust, even though the living trust becomes the legal owner of the assets through its trustee. As long as the settlor has capacity, he or she can also function as the trustee. Of course, another trustee will eventually take over.
Your first impulse might be to name a close friend or family member to act as the trustee. After all, these people probably know your financial situation and goals better than some stranger at a financial services company. Being a trustee is more than just a favor you do for someone, though. The trustee has many obligations, which might include:
- Preparing and maintaining accounting records of the trust
- Investing the trust’s assets in a strategic manner
- Distributing assets to beneficiaries in accordance with a rigid schedule
- Make decisions about when and how to distribute assets to beneficiaries
Unfortunately, being a nice person with knowledge of a individual’s or family’s finances sometimes isn’t enough for that person to be an effective trustee. A trustee needs to be honest, transparent, competent, and unafraid to make difficult decisions. One way to make friends or family members effective trustees is to name more than one trustee – although this must be done carefully, as it can create more problems than it solves. A particular obligation or set of obligations could be assigned to one trustee while the other duties can be delegated among the other trustees.
Another option is to hire a professional fiduciary to handle your trust. Many financial institutions offer this service, and these companies usually have more safeguards in place to ensure that the trust’s instructions are properly carried out. You’ll have to worry about administrative fees if you hire a professional trustee, though, but oftentimes they can save the trust money because they are more efficient in carrying out their duties. Also, professional fiduciaries in California are bonded, licensed by the State of California, and highly regulated as well.
Conclusion
Choosing a trustee is just as important as deciding how you want your trust to be structured and its overall purpose within your estate plan. You might find that asking a friend or loved one to act as a trustee is less expensive than hiring a professional, but the money you save might not be worth the headaches that come with an inexperienced trustee.
The Law Offices of Tyler Q. Dahl is committed to helping Californians make money, protect that money, and efficiently pass that money down to their children and grandchildren. Forming a trust (or several) is often a component of effective estate planning, and our firm can provide personalized legal services to help you accomplish your goals. Attorney Tyler Q. Dahl is also a Certified Tax Coach, which is a distinction shared by fewer than 100 attorneys nationwide. Let us know how we can help you, your family, and your assets.
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