Who Should Serve as Trustee?

So, you have decided in consultation with your estate planning attorney that a revocable living trust is best for you and your family. One of the first issues you will have to address is naming a trustee. It is likely that you will be the initial trustee. Therefore, the question becomes who will serve as successor trustee in the event you are incapacitated and after you pass away.

One of the great things about a revocable living trust is the flexibility it provides to you in your estate planning. In regards to appointing a trustee, you have almost endless options. For our purposes, however, I will group them into three categories: (1) corporate or institutional; (2) individual; (3) professional adviser.

Corporate or institutional trustees are typically banks or trust companies. This type of trustee is professional, experienced and regulated by the state and federal government. Yet, many banks and trust companies manage only very large trusts with substantial assets; it can be hard to find one willing to administer the smaller trusts that most of us have. Furthermore, unless you have a very close, long-term relationship with the bank or trust company and its staff, it is unlikely they will understand the dynamics of your family, which can be crucial to the administration of your trust going smoothly.

The second category of trustee is an individual. Usually, this is a family member or close friend. The advantage of having a family member or close friend be your trustee is they almost certainly understand your family and all of the variables at play. In addition, while individual trustees can receive a fee for administering your trust, they probably will not charge as much as a bank or trust company. On the other hand, a family member or friend may lack knowledge about trusts. This could require them to hire help, which largely negates the cost savings in comparison to a corporate or institutional trustee.

Lastly, there are professional advisers — namely attorneys and CPAs. For many people, this is a good compromise between the corporate trustee and the individual trustee. Attorneys and CPAs, especially those with long-standing ties to your family, presumably have some of the family knowledge that bank and trust companies lack. Unfortunately, if they have represented multiple members of your family, there may be conflicts of interest that prohibit them from serving.

Choosing a trustee is often the first choice you will make in designing your revocable living trust. Every situation is different. The discussion above is merely a general overview. Your estate planning attorney should talk over this with you in depth, counsel you about your options and help you come to a decision.

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