Choosing a trustee and successor trustee is one of the most critical decisions you will make when creating a trust. Whether your trust is revocable or irrevocable, the trustee is responsible for managing those assets according to your instructions. This role carries significant responsibilities, legal obligations, and potential liabilities. Selecting the right trustee and planning for an effective succession can ensure that your estate is administered smoothly, your beneficiaries are cared for, and your intentions are faithfully carried out.

 

WHAT TO CONSIDER WHEN CHOOSING A TRUSTEE

 

• Trustworthiness and Integrity: Above all, the trustee should be someone who is honest, ethical, and reliable. This person or institution will have control over your assets and must act solely in the best interest of the beneficiaries.
   

• Financial and Legal Competence: Trustees must be capable of handling investments, preparing or reviewing tax filings, and maintaining accurate records. If your trust holds complex assets such as a business, real estate, or investment portfolios, the trustee should have experience in those areas or hire the relevant advisor.
   

• Impartiality and Fairness: If you’re appointing a friend or family member, ensure they can treat all beneficiaries fairly and are not likely to be influenced by personal biases or family dynamics.
   

• Availability and Willingness: The trustee must be willing and able to devote the time and attention required. This includes communicating with beneficiaries, making timely distributions, and fulfilling tax and legal obligations.
   

• Cost: Professional trustees such as banks, trust companies, or attorneys typically charge a fee based on a percentage of trust assets or a flat annual rate. While more expensive than individual trustees, they offer expertise and continuity.

 

WHAT TO EXPECT FROM A TRUSTEE

 

Trustees are fiduciaries, meaning they are held to a high legal standard and must act with loyalty, prudence, and care. Their responsibilities typically include:

 

• Managing and investing trust assets prudently

• Keeping accurate records and preparing accountings

• Filing tax returns and paying taxes owed by the trust

• Making distributions to beneficiaries as directed by the trust document

• Resolving disputes and answering beneficiary questions

• Working with attorneys, accountants, and financial advisors as needed

 

Trustees are legally liable for mistakes, negligence, or breaches of fiduciary duty. As such, they may carry liability insurance or rely on indemnification clauses in the trust.

 

CHOOSING A SUCCESSOR TRUSTEE

 

Equally important as naming your initial trustee is identifying one or more successor trustees in case your original choice is unable or unwilling to serve. Successor trustees step in due to death, incapacity, resignation, or removal.

You may name a series of successors or empower your beneficiaries or a majority of adult children to appoint a successor. This flexibility ensures the continued smooth administration of your trust.

 

Best practice is to regularly review your successor trustee list and update it if the individuals or institutions named are no longer appropriate.

 

COSTS AND RISKS OF TRUSTEESHIP

 

Serving as trustee is not without cost. Family member trustees usually do not charge a fee, while a corporate trustee generally charges 0.5% to 1.5% of trust assets annually, depending on complexity.

 

Risks include:

 

• Legal liability for mismanagement

• Personal conflicts with beneficiaries

• Delays or complications in asset distribution

• Tax and compliance errors

 

To mitigate these risks, grantors may include exoneration clauses, allow trustees to hire advisors, and purchase fiduciary liability insurance.

 

BEST PRACTICES FOR TRUSTEE SELECTION

 

• Clearly define trustee powers and responsibilities in the trust document

• Consider naming co-trustees (e.g., a family member and a professional)

• Include provisions for trustee resignation, removal, and replacement

• Periodically review trustee appointments and successor designations

• Communicate your intentions and expectations to the trustee and beneficiaries

 

If you're uncertain about who to appoint, consult an estate planning attorney or consider a professional trustee with experience in administering trusts similar to yours.

 

CONCLUSION

 

The trustee is the cornerstone of any trust. Whether managing your assets during life, administering your estate after death, or caring for beneficiaries for generations, a trustee must be selected with care and foresight.

Take the time to consider your choices, understand the responsibilities involved, and consult with professionals. An informed trustee selection is one of the most valuable gifts you can give to your heirs—and to the legacy you leave behind.