Are you preparing to choose a trustee? Knowing how to choose a trustee, and what your options are, is not as straightforward as it seems. In fact, there are a number of factors and considerations that come into play when it’s time to choose a trustee.

These factors include: 

• The trust’s duration
• The ages of the beneficiaries      
• The health of beneficiaries
• The beneficiaries’ financial circumstances and prospects
• Assets to be administered 

While many families name a relative as trustee, such as Uncle Bob or Aunt Jane, real estate and business assets may be in better hands with a professional who knows how to navigate handling those assets. Or, if young children are involved in the distribution, then the children’s guardians — not Bob or Jane — should be the ones to make that decision.

Many trustees are chosen because of their professional experience in the trust and estate administration field. They may also be uniquely qualified to manage settling specific kinds of trust assets, including a professional practice or a business. For example, a dentist might be the best choice to sell, run, or dissolve a dental practice; an architect, an architectural practice.

It’s also possible for professionals and family members to work together, with the family members serving as co-trustees. They may also be given specific rules. In this case, the family member might be acting as a distribution trustee. Their role would be to make decisions regarding the use of funds to support matters such as education, health, and beneficiary support. On the other hand, the professional trustee(s) would help to file taxes for the trust and guide its investments.

The Trustee Spectrum of Options 

When considering how to choose a trustee, you have a spectrum of options available to you, depending on your specific situation and needs. 

• At the lower end of the spectrum, you have a sole trustee. This individual may be an untrained family member.
• In the middle, there are multiple trustees, including professional involvement.
• At the upper end of the spectrum, there is professional trust administration.

Having frequently served as a trustee and having observed others, we know that the role is full of stressors. Just as important as the qualification of trustee is the ability to be level headed, steady, a team player, and loyal. Understanding the spectrum will help you determine how to choose a trustee.

Choosing a Qualified Trustee

Purely on the identity of the trustee, let’s look at the spectrum of possibilities.

From the least professionally qualified (and easiest to hire and least expensive) to the most qualified (and expensive):

• The grantor(s) serve as trustee.
  
• The grantor’s spouse serves as trustee or surviving trustee.
  
• A friend or family member acts as the trustee. This individual is usually untrained and relies on their common sense and instincts.

• Two or more members of the family act as trustees. The trustees act by majority.
• Two or more members of the family act as trustees. The trustees act unanimously.
• One or more family members manage the trust, but often get advice from accountants and attorneys with expertise in taxation and trust law.

• One or more family members work with professional co-trustees. These professionals might include a CPA or accountant. All decisions regarding the trust are unanimous.
• An independent or temporary trustee is appointed to handle special circumstances which may need objective judgment. These situations include making certain tax elections, or discretionary distributions to the trustee themselves.
• An administrative trustee handles the trust. This professional trustee might be an attorney or CPA with expertise in trust law and taxation. They will assist with estate administration in the short term, immediately after the grantor’s death. The role is comparable to an executor of a will. 

• Permanent, professional trustees who step in on contingency when the family trustees aren’t available or well suited.
• Professional trustees acting in a permanent manner, including attorneys with expertise in trust law and taxation or CPAs, who work alongside family members from beginning to end. They work with both the grantor(s) and any co-trustees.
• A professional trustee who acts as the permanent, sole trustee once the grantor can no longer serve.

• A professional trustee (or trustees) who acts as the sole and permanent trustee. They are brought in from the beginning, instead of when family members become unavailable.
• Professional advisor(s), such as a CPA or lawyer, acting as co-trustee with a national institution, local trust company, or other organization.
• Rather than a professional trustee, a banking institution steps in to handle assets and distributions. The bank would have a solid trust department and would handle both personal and real assets in place of a family member or professional trustee.

• Specialized trustees who would handle a selection of rare or unique assets. These assets might include business and professional interests, or pieces of valuable property such as artwork or jewelry. They might also act as a trustee for a specific family member, either because charitable purposes need to be fulfilled, or because the family member has a disability. 
• Any feasible combination of the above options, who would step in once the grantor cannot serve.

Loyalty

The job of trustee is not an honor or reward, or a role for the most financially savvy in all cases. Northeast Private Trustees believes strongly in the need for the right personality, strong background, and conscientiousness for the job of trustee or trust officer.

Loyalty to all beneficiaries above what the smartest person necessarily thinks should be done may be the highest qualification of all and most difficult to judge ahead of time. Qualities like listening ability, openness, judgment, availability, reasoning, considering the needs of others above what is convenient or easy, or making the most money for the trustee should be part of your considerations in choosing the trustee.

Depending on your needs, you may be able to rely on family or prefer to choose professionals, specialists, or institutions along the trustee arrangement spectrum. If you need assistance determining which arrangement might be right for your situation, contact our office.

Removing a Trustee?

Unfortunately, when a trustee is not a good fit, it can feel like it’s too late to do anything about it. Not necessarily. To learn more about how to remove and replace a trustee, read our blog here.