To create a comprehensive estate plan that addresses all of your estate planning needs and goals you will need to incorporate a variety of estate planning tools and strategies into your overall plan. One of the most common of those tools is a trust. In fact, trusts are frequently found in the average estate plan today. If you are contemplating the use of a trust in your estate plan, one of the most important decisions you will need to make when you create your trust is who to appoint as your Trustee. You will first need to decide if you wish to appoint a layman or a professional, such as a trust department at a bank, as your Trustee. Understanding why professional trustees can make better Trustees could be the key to the success of your trust.
What Is a Trust?
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Trust beneficiaries can be people, organizations, or even pets. A trust can also include current and future beneficiaries. Trusts are also divided into two broad categories – testamentary and living trusts. A testamentary trust is one that activates upon the death of the Settlor via a provision in the Settlor’s Last Will and Testament in most cases. A living trust activates as soon as all formalities of creation are in place. Living trusts can be further sub-divided into revocable or irrevocable living trusts. Because a testamentary trust is activated via a provision in the Settlor’s Will, and a Will can always be revoked up to the time of death, a testamentary trust is also always revocable by the Settlor.
Trustee Duties and Responsibilities
Among the most common reasons for a trust to fail is appointing the wrong person as Trustee. People often appoint a close friend, a spouse, or a family member as their Trustee based solely on the fact that they “trust” this individual to have their best interests at heart. Unfortunately, successfully administering a trust requires much more than simply good intentions. Gaining a better perspective on what the actual duties and responsibilities are of a Trustee helps hammer home the importance of appointing the right person for the job. Some of the most common duties and responsibilities of a Trustee include:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
Professional vs. Personal Trustee
Successfully administering a trust requires the Trustee to be able to understand and implement all state and federal laws relating to the trust. A Trustee is also required to understand financial concepts and strategies that will ensure the trust assets grow over time. Both of these requirements are reason enough, in most cases, to appoint a professional Trustee; however, appointing a professional Trustee provides additional benefits as well. With a professional Trustee, you greatly diminish the possibility of a conflict of interest surfacing and you provide a neutral party to mediate disputes when one arises. Professional trustees clearly understand the laws relating to trust administration and have the financial knowledge and skills necessary to protect and grow the trust assets. Before you make a potentially fatal mistake of appointing someone who lacks the experience and skills necessary to successfully administer your trust, take the time to at least consider appointing a professional trustee first.
Contact Illinois Trust Attorneys
For additional information, please download our FREE estate planning worksheet. If you have questions or concerns regarding who to appoint as the Trustee of your trust in the State of Illinois, contact the experienced trust attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.