A trustee’s responsibilities

Being a trustee is not just a passive supervisorial job, but one that requires active decision-making. Trustees are involved in hiring outside professionals like investments advisors, CPAs, and lawyers to assist with certain duties as needs arise. They must assess the value of assets in the trust for tax and insurance purposes. They must pay off all debts and be prepared to make hard decisions like liquidating certain assets if necessary. They must compensate any outside professionals hired and keep records of all transactions. It is also crucial that they stay in regular contact with the beneficiaries, notifying them of important events and resolving disputes that may arise when there are multiple beneficiaries.

What to look for in a trustee

When you hire a trustee, you are asking them to take on a lot of responsibility. Trustees are fiduciaries, which means they take on a legally binding duty to act solely in the beneficiary’s best interest rather than their own. Your trustee must be able to act impartially without letting personal feelings cloud their judgment. They must have knowledge of financial markets and be able to make wise investments that work towards the trust’s interest, or otherwise hire an investment manager who can. They must understand that running the trust is a massive time commitment that may span years, and be prepared for the long haul.

The trustee must be both ethical and competent, as someone who means well may still cause problems through irresponsibility. You should have a sense that they understand your family and will act in accordance with your wishes. They should also be skilled at managing interpersonal relationships in order to work with the beneficiaries as well as outside professionals.

Legally, you can hire whoever you want as a trustee, but that doesn’t mean you should hire just anybody. There are two main avenues people tend to go down when choosing a trustee. Each has its advantages and disadvantages, you should consider before making a final decision.

Family trustees

Many choose to hire a family member to serve as their trustee. This approach does have certain potential advantages. Family members are usually eager to do the work as a favor and typically do not charge administrative fees. They also understand the family’s dynamics and know the beneficiary as an individual.

However, there are several potential drawbacks to mixing business with family. You love your family, but that means you may be prone to overestimating their suitability for the job. Your chosen family member likely does not have the financial skills needed to handle your assets properly. Despite this, they are still subject to all of the same requirements and liabilities as professionals. They may well find themselves in over their head with a workload they did not anticipate. And even if they choose to delegate some duties to others, they don’t have experience in vetting professionals and may not make the best choice.

There is also the danger of straining family relations. Feelings may be hurt through the choice of one family member over another to act as the trustee. If you have to remove the trustee from their duties for any reason, resentment is almost certain to linger. The trustee may also decide to ask for compensation after realizing how much work is involved, even if they initially agreed to work for free. Things can get especially contentious if there are multiple beneficiaries. Personal factors such as disability status, legal problems, or their financial situation may require beneficiaries to be treated differently. But they may not see it that way and accuse the trustee of favoritism.

The benefits of hiring a professional trustee

If you want to avoid any risk of causing family drama, hiring a professional trustee is a great way to put your mind at ease. Professional trustees have years of training and experience in handling assets. In the process, they’ve learned how to deal with complex situations, such as multiple beneficiaries. They have the experience to know their limits and will not take on work they cannot handle.

Most of the time, they work with an organization of attorneys, investment managers and others that can provide additional support as needed. This also helps to avoid the issue of successorship. If your family trustee dies or becomes incapacitated, you had better hope that you have already found a successor, which is no easy task. But with an organization, their colleagues are ready to jump in and continue managing the trust seamlessly.

Since professionals are outside your family, they can take a more objective view of things. They weren’t there when he-said-this or she-said-that, so they are much better equipped to help resolve conflicts. A professional will also be understanding if you choose to end the relationship and will not hold anything against you personally. Another benefit is a professional is that still they can work with a family member if you want, thus combining the benefits of both approaches.

One thing to note is that professionals do charge fees for their services. But if you are willing to pay a little more, you will find that the benefits are worth the while. Our professionals will work with you – and each other – to secure.