When Is a Professional Trustee the Best Choice?

At some point, you may decide that incorporating a trust into your estate plan is a good idea. If you do, one of the most important decisions you will need to make when creating your trust will entail deciding who to appoint as the Trustee of your trust. The trust administration lawyers at Nash Bean Ford & Brown, LLP discuss when a professional Trustee is the best choice for your trust.

What Is a Trust?

A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trust can be further divided into revocable and irrevocable living trusts.

Benefits of a Professional Trustee

The overall job of a Trustee is to protect and grow the trust assets and administer the trust according to the terms created by the Settlor. A common mistake Settlors make is to appoint a family member, or close friend as the Trustee of their trust without objectively considering whether that person is the right person for the job. Often, the better choice is to appoint a professional Trustee for several reasons, including:

• Experience – successfully administering a trust requires a certain amount of legal and financial knowledge and experience. The Trustee of a trust should ideally be familiar with all the applicable state and federal laws that govern trust administration. In addition, a Trustee needs to have the financial wherewithal to invest the trust assets in a way that they will grow over the lifetime of the trust. Most of the time a professional Trustee will have more experienced and knowledge about trust administration than a spouse/family member/friend has.
• Objectivity – a Trustee may have the authority to make discretionary disbursements if certain conditions are met. A professional Trustee is typically more likely to be objective when deciding if a request for a disbursement should be granted because the Trustee does not know the beneficiary on a personal level.
• Liability — the Trustee of a trust can, under certain circumstances, be held liable for the loss of assets or other negative outcomes during the administration of the trust. Not only would you not want someone close to you to be in such a position, but a professional Trustee is less likely to be in that position because he/she has the experience and the knowledge to avoid those circumstances.
• Conflicts – the Trustee of a trust is often called upon to resolve conflicts among beneficiaries and is always required to try to prevent them from occurring in the first place. When the Trustee knows the beneficiaries on a personal level it can be must more difficult to avoid, or help resolve, conflicts. Worst still, the Trustee can easily run into a conflict of interest that could threaten the success of the trust.
• Desire – Settlors often make the mistake of assuming that the person they appoint as Trustee is willing and able to serve. Unfortunately, that is not always the case, particularly if the trust is a testamentary trust because it means that the Settlor recently died. A spouse, family member, or friend may not want to act as your Trustee while grieving your recent death. With a professional Trustee these issues are not a concern.

Contact  Trust Administration Lawyers

For additional information, please download our FREE estate planning worksheet. If you have additional questions or concerns related to appointing a professional Trustee to administer your trust, contact the experienced trust administration lawyers at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.