One thing that all trusts have in common is the need to appoint a Trustee to oversee the administration of the trust. This is also where many people the mistake of appointing a spouse or close friend to the position without objectively considering the individual’s qualifications for the job. The North Andover trust attorneys at DeBruyckere Law Offices help you to understand the benefits of appointing a professional Trustee.
What Does a Trustee Do?
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. The specific duties and responsibilities of a Trustee are numerous and varied; however, they typically include things such as:
- 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
Benefits of a Professional Trustee
Settlors often appoint a spouse, family member, or close friend as the Trustee of their trust based solely on the fact that they “trust” that person to have their best interests at heart. Although admirable, good intentions are not usually sufficient to successfully administer a trust. A professional Trustee is usually a better choice for several reasons.
Experience is among the most important reasons to appoint a professional Trustee. 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. Not only will a professional Trustee typically have considerably more experience than someone close to you, but a professional also brings objectivity to the position.
If your Trustee has the authority to make discretionary disbursements, 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. This also helps when a conflict arises. A Trustee 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 much more difficult to avoid, or help resolve, conflicts.
Liability is yet another consideration when choosing a Trustee for your trust. Under certain circumstances, a Trustee can 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.
Finally, you need to consider whether your spouse, friend, or family member really wants to serve as your Trustee. If the trust you create is a testamentary trust it means you will have recently passed away when the trust activates. A spouse, family member, or friend may not want to act as your Trustee while grieving your recent death. With a professional Trustee you do not have to worry about whether he/she is willing and able to serve.
Contact North Andover Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about appointing a professional Trustee, contact the North Andover trust attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
A Trustee does face the risk of being held personally liable for errors or mistakes under certain circumstances.
As the Settlor of the trust, you will create the trust terms that guide the administration of the trust. You will also typically include a “trust purpose” in your trust agreement.
Yes. A Trustee (professional or otherwise) is entitled to a reasonable fee for his/her time dedicated to the administration of the trust.