Opinion: Factors in choosing the right trustee

Andy Peebles

A trust agreement is a common tool implemented as part of a solid estate plan, ensuring the smooth transfer of assets to beneficiaries while minimizing potential complications. One of the key decisions in creating a trust is selecting the right trustee. A trustee’s primary role is to manage and distribute the trust assets according to the terms outlined in the trust document, taking care to communicate effectively with the beneficiaries and comply with the multiple duties imposed on trustees under the law. When choosing a trustee, individuals often face the decision between appointing a corporate trustee or an individual trustee. Here’s a rundown of the differences.

Individual trustee
Selecting an individual trustee, such as a family member or close friend, often appeals to those who value a personal connection and familiarity. There are certain advantages to someone who understands the dynamics and intricacies of a family or personal relationships. This can lead to a more nuanced and empathetic approach when managing the trust and making distributions.

Individual trustees may have a deeper understanding of the family’s needs and future aspirations, allowing for a more customized and personalized approach to managing the trust.

However, selecting an individual trustee also comes with potential challenges. They may lack the time, organizational skills, expertise or experience required to navigate complex financial matters, tax implications and legal intricacies associated with trust administration. Additionally, personal relationships can sometimes become strained in financial decisions, potentially leading to conflicts among family members.

Corporate trustee
A corporate trustee, often a professional financial institution or a trust company, brings a level of expertise and objectivity to managing complex trust structures. They typically have experience handling a diverse range of trusts, allowing them to navigate legal, financial and administrative challenges with a high degree of competence. Usually, a team of advisers is assigned to each trust to share the multiple management responsibilities.

Professional trustees are well-versed in fiduciary responsibilities, legal compliance and investment management. This expertise can be especially crucial in the administration of complex trusts involving substantial assets, diverse investments and intricate tax implications. Corporate trustees also provide continuity, ensuring the seamless management of the trust even in the event of changes in family dynamics or the passing of an individual trustee.

While corporate trustees offer professionalism, some individuals may perceive them as lacking the personal connection of an individual trustee. It is therefore important to weigh the benefits of expertise and objectivity against the desire for a more personal touch.

Finding the balance
Ultimately, the decision between an individual and a corporate trustee depends on the specific needs and goals of the creator of the trust. In some cases, a hybrid approach may be suitable, involving a combination of individual and corporate trustees serving together to leverage both personal insights and professional expertise.

When selecting a trustee, consider the following factors:

• Expertise and experience. Evaluate the complexity of the trust and the financial acumen required for its management. If the trust involves intricate financial matters or it may last for a significant amount of time, a corporate trustee might be more suitable.
• Personal dynamics. Consider the family dynamics and relationships involved. If maintaining a personal touch is crucial, an individual trustee may be preferred, provided they have the necessary financial acumen or can work alongside financial professionals.
• Soft skills. Effective communication and organizational skills are essential. Clear communication and transparency ensure that beneficiaries understand the trust’s terms, decisions and overall management. The trustee needs to be well-versed in the duties imposed on them under the law and should be sufficiently organized to respond to all questions and requests for information by a beneficiary or a court, if necessary.

Choosing the right trustee is a critical decision in the establishment and administration of a trust. The ideal choice often involves striking a balance between personal relationships and financial acumen. Regardless of the trustee type chosen, open communication, periodic reviews and a clear understanding of the trust’s goals are essential.

Andy Peebles is an estate planning and business attorney with the law firm of Carnahan Evans PC. He can be reached at apeebles@carnahanevans.com.