Important Considerations When Selecting a Trustee
Creating a trust is an important part of estate planning for many individuals. Usually, the individual creating the trust also will be the initial trustee, with a successor trustee named to carry on when the individual becomes incapacitated or dies. When it comes to selecting a trustee, you need to be aware of several issues. To start off, a trustee must manage and oversee all of the assets of the trust. That might require a significant amount of effort, depending on how complex your trust is and the number of assets involved. In some cases, it could become almost a full-time job.
The trustee can be a spouse, relative, trusted friend, professional trustee, bank or corporate trustee. The duties of a trustee are complex and involve, among other things:
- Reviewing the trust documents and ensuring that the terms of the trust are followed
- Managing the investments of the trust
- Being responsible for the trust’s tax reporting and related tax issues
- Trust recordkeeping
- Overseeing the distribution of assets to the beneficiaries
- Ensuring that each beneficiary receives their proper share of the distributions
If a trustee is also a beneficiary, there are built-in conflicts of interest between the interests of the trust and the beneficiary trustee’s personal interests. This is also true if the potential trustee has any financial interests that possibly could be in conflict with the interests of the trust. If you plan on placing this responsibility on a friend or relative, are they really willing to take on the responsibility and spend the time that it takes to correctly perform the duties of the trustee? Does the potential trustee have the knowledge, ethics and abilities to handle the responsibility? These are all things to consider carefully before selecting a trustee.
E Thomas Associates Inc. is a registered investment advisor in Kentucky.
Dave Smith & Tony King are Registered Representatives of and securities are offered through Dalton Strategic Investment Services, Inc., member FINRA & SIPC. 6408 River's Edge Rd, Greenville, OH 45331
.