How to Choose a Trustee to
Handle Your Affairs

We all struggle sometimes to make the best decisions for our lives. With so many potential paths available to us, choosing which one will bring about the most positive outcomes can be hard. Making a choice is especially difficult when that decision may have lifelong implications—such as in choosing a trustee who will handle your affairs when you become sick or pass away.

This article aims to provide readers with insight into the importance of this process and guidance on how to select an appropriate person or business entity as their trustee. In the cases of most revocable living trusts, that can be you and your spouse to start! The next step is a tough choice for many people. From considering what type of arrangement might be most beneficial for you, to think through whom you should entrust with managing your affairs—this article offers helpful advice for picking a trustee.

Understand the Types of Trustees Available – Learn about the different types of trustees and what they can do for you

Understanding the different types of trustees available can be an important step in managing your estate or trust. There are two main distinctions to consider:

  1. Individuals versusprofessionals – Individual trustees may be friends or family members who are trusted to carry out your wishes, who may not have the expertise or energy to perform the job adequately, who will be less rigid when handling your trust and who tend to not charge for their services at all.Professional trustees, on the other hand, are specialized experts who can provide greater financial and legal expertise, charge fees, and will follow your wishes exactly. While working with the attorney, you should be very careful considering the language of each document when a professional trustee is involved. Professional trustees can be attorneys, CPAs, or trust companies. Professional trustees are more appropriate in dealing with family dynamics or complex asset classes or amount of money. Family trustees tend to be more appropriate in simple financial matters where everyone is agreeable.
  2. Sole trustee versus Cotrustee. When it comes to sole versus cotrustees, there are different sets of benefits and drawbacks. Sole trustees consolidate power with one person, which helps get things done, but requires the person to be a willing, competent, and ethical person who is a patient and diligent communicator. In case of a dispute with a sole trustee, the trustee has a lot of power versus the beneficiary who may be questioning the trustee. Cotrustees are useful when there are multiple people with different aptitudes and levels of availability – it helps spread and delegate the work around. The issue with Cotrustees is that most power disputes will result in litigation.

Gather References – Ask trusted advisors and contacts for recommendations on potential trustees

Selecting a trustee is an important decision and it can be challenging to determine whether a family member or a nonfamily member is the best fit for the role. One way to gather insight is by seeking recommendations for trustees from trusted advisors (attorneys, CPA, or financial advisors) and contacts (friends who may have similar family structures, values, and approximate net worth). Your close advisors will be familiar with your family dynamics and wishes, and they are aware of the professional trustees who are out there.

For friends and family, the potential trustee candidate does not necessarily need to live close to you. With today’s technology, duties can be fulfilled remotely. It may be better to select the child 1200 miles away who is trustworthy and ethical, versus the child living in your house who cannot keep a job.

Understand that the trustee has to have general knowledge and ability (organization and follow through) on the following subjects:

  • Bookkeeping and bill payments
  • Basic tax law
  • Investment management
  • Cash and banking management
  • Basic legal concepts surrounding contracts

Your trusted advisors may be able to provide valuable feedback on potential candidates and help narrow down the search. For professional trustees, you’ll find that some services are included in the fee and other services require an extra charge by other providers. An example is that some brokerages will charge the same fee for trustee services and asset management.  Additionally, it’s important to understand how professional trustees charge for their services. Some may charge anannual percentage of assets under management, while others may have an annual fixed fee or charge by an hourly rate. By gathering references and understanding the different fee structures, you’ll be better equipped to select a trustee that meets your needs and has the expertise to manage your assets effectively.

Interview Candidates – Get to know each candidate personally and ask questions to determine who is the best fit for your situation

When it comes to selecting a trustee, it’s important to go beyond just looking at their credentials on paper. For family or friends, their credentials can include the nature of your relationship with them and their resume. Getting to know each potential candidate personally in the context of managing your finances can make all the difference in finding the right fit for your situation. For family and friends, the interview does not need to be formal. You may simply need to float the idea and see their response. If you think the person is capable, you’ll want to make sure that they want to do the job in the time when their help is needed.

For professional trustees, this means asking the right questions to better understand their experiences and values. Some key questions to consider asking a potential trustee may include, “What motivated you to pursue a career in this field?” or “Can you talk about a time when you had to navigate a difficult decision in your professional life?” By digging deeper into their responses, you can gain a clearer picture of who they are and what they could bring to the table as a trustee for your organization.

Review their Fees – Make sure you understand all costs associated with hiring a trustee before making a decision

Before hiring a trustee, it’s important to review their fees to ensure that you fully understand all the costs. Hiring a trustee can be a significant financial investment out of a trust or estate, so it’s crucial that you know what you’re getting everyone into before making a decision. Of course, it is worth paying for a professional trustee if the family member you name steals all the money from the other beneficiaries or cannot complete a task and there are financial consequences for failing to execute.

Some trustees may have hidden fees or charge more for specific services, so it’s important to ask questions and get a clear breakdown of all costs associated with their services. By understanding all the fees upfront, you can make an informed decision that aligns with your financial goals and budget. For professional trustees, get a feel about the succession plan if the professional retires or the company gets sold. So, take the time to review the fees and have a candid conversation with your potential trustee before making any commitments. For many trusts, you’ll have the ability to change your trustees as long as you have capacity.

Make Your Decision – Choose someone with expertise, trustworthiness, and reliability to handle your affairs moving forward

Choosing the right person to handle such matters is crucial. It’s essential to look for someone who possesses expertise, trustworthiness, and reliability. Our advice calls and consultations at our firm really dive deep into making sure you have picked the right people among your given options. We will asksthe questions to double-check your thinking on the matter and we can give you feedback about your selections based on working for all types of trustee arrangements when it comes down to settling an estate or trust.

Making a decision about whom to trust as your trustee is an important process that can help you get “unstuck” and move forward. With these steps in mind, you can confidently choose someone with expertise, trustworthiness, and reliability to handle your affairs moving forward.

If you’d like extra guidance throughout this process or more information on what a trustee can do for you, I encourage you to set a free intake call with our team. We are here to help walk you through this tough decision so that your work is successful now and in the future.