Choosing the right trustee is one of the most important decisions in estate planning. A trustee is responsible for managing trust assets, making distributions, and ensuring that the trust’s terms are followed. Not everyone is suited for this role, and making the wrong choice can lead to financial mismanagement or family conflict.
If you are creating a trust, our Minneapolis trust lawyers can help you determine the best trustee for your unique situation. Let’s explore who makes a good trustee—and who might not be the best choice.
What Makes a Good Trustee?
A trustee must act in the best interest of the trust’s beneficiaries, following both legal and ethical obligations. Here are some key qualities to look for a trustee while planning your estate in Minnetonka:
1. Financial and Administrative Skills
Managing a trust often requires handling investments, paying bills, keeping accurate records, and filing taxes. A trustee should be financially responsible and detail-oriented.
2. Impartiality and Fairness
A trustee must treat all beneficiaries fairly, regardless of personal relationships. This can be especially important in blended families where children from different marriages may be involved.
3. Good Communication
A trustee must communicate effectively with beneficiaries, keeping them informed about the trust and answering their questions. Poor communication can lead to misunderstandings and disputes.
4. Trustworthiness and Integrity
A trustee is legally required to act in the beneficiaries’ best interest. If there is any doubt about someone’s ability to act honestly, they may not be the right choice.
5. Availability and Commitment
Serving as a trustee is a time-consuming responsibility. The trustee must be willing and able to manage the trust for years, or even decades, depending on its terms.
Read more in our article, Should I Agree to Be a Trustee for a Family Member’s Trust?
Who Should Not Serve as a Trustee?
While many people assume a close friend or family member is the best choice, that is not always the case. Here are some reasons why someone might not be the right trustee:
1. A Family Member Who May Struggle with Objectivity
If a family member is likely to play favorites, hold grudges, or struggle with impartiality, they may not be the best trustee. This is particularly important in situations where siblings or step-siblings are involved.
2. Someone Who Lacks Financial Knowledge
If a potential trustee does not have experience handling investments, taxes, or financial management, they may struggle to manage the trust effectively.
3. A Person with Personal Financial Problems
A trustee with personal debt, bankruptcy history, or poor money management skills may not be the best choice. Their financial troubles could interfere with their ability to manage the trust responsibly.
4. A Trustee Who May Be Vulnerable to Pressure
If a potential trustee is easily influenced by others—whether by family members or creditors—they may not be able to uphold their fiduciary duty. A trustee must be able to say no to improper requests for trust funds.
5. Someone Who Doesn’t Have the Time or Interest
Being a trustee is a long-term responsibility that requires attention to detail. If someone is too busy with work, family, or other obligations, they may not be able to dedicate the necessary time.
6. Someone Who Lives in Another Country
A trustee who lives abroad will have to manage the trust remotely, which can be difficult when dealing with financial institutions, legal paperwork, and beneficiaries in the U.S. More importantly, naming a non-U.S. resident as a trustee can create complex tax and reporting issues. Foreign trust taxation rules are strict, and having a trustee outside the U.S. can lead to additional administrative burdens and expenses.
7. A Beneficiary Named in the Trust
Naming a beneficiary as the sole trustee can create legal and financial risks. Creditors may be able to access trust assets by “stepping into the shoes” of the beneficiary-trustee, potentially undermining the trust’s protections and exposing funds meant for future support.
What Are Alternative Trustee Options?
If you’re unsure about appointing a family member or friend as a trustee, you have other options:
- Corporate Trustees: Banks or trust companies provide professional trustee services, ensuring that the trust is managed objectively and responsibly.
- Co-Trustees: You can appoint multiple trustees, such as a family member and a professional trustee, to balance personal insight with financial expertise.
- Independent Trustees: A financial advisor, attorney, or accountant with experience in trust administration can serve as a neutral and knowledgeable trustee.
Choosing the Right Trustee for Your Needs
The right trustee should have the skills, integrity, and availability to manage the trust effectively. Every family’s situation is different, and working with experienced Minnetonka trust lawyers can help you make the best decision for your estate plan.
Need Help Selecting a Trustee?
Our team of Minnetonka trust lawyers at Stone Arch Law Office can guide you through the process of choosing the right trustee for your trust. Book a Call today to discuss your estate planning needs.
Reference: Motley Fool (May 2, 2023) “What Is a Trustee?”
