Date: Feb 08 2018
Whether establishing a new trust, modifying an existing trust or dealing with a transition of the incumbent trustee, selecting the person or institution who will act as your trustee is one of the most important decisions you and your family members will make.
Many families want to keep everything “in the family,” and it is natural for them to consider using a close family member such as a parent, sibling or cousin for this important position. It is also natural to worry if this choice will come back to haunt you later. Check out the answers to common questions below to see if this choice makes sense for you.
What Skills or Qualifications Should a Trustee Have?
The legal qualifications for a trustee are simple: he/she must be over the age of 18 and legally competent to manage his/her own affairs.
The practical qualifications, however, are much more complicated. A trustee must:
- Have the skill set to properly administer the trust and meet the needs of the beneficiaries.
- Possess and exercise good judgment.
- Truly understand the duties and responsibilities of a trustee.
- Recognize what he or she does not know and seek out and follow sound advice.
- Be available for a long period of time.
- Have the time and be committed to serving the needs of the beneficiaries.
- Be free of conflicts of interest.
Is It Okay to Use a Family Member as My Trustee?
Absolutely! Choosing a relative as your trustee can offer several advantages. He or she would likely:
- Share your values and understand the family legacy and any family businesses.
- Be able to keep in mind the settlor’s objectives in creating the trust.
- Understand your family dynamics and help navigate emotional issues in order to stay focused on achieving the settlor’s and family’s goals.
Plus, they usually work cheap!
What Are the Disadvantages to Using a Family Member as My Trustee?
Choosing a family member has its drawbacks. A relative may:
- Lack the fiduciary experience and skills to effectively administer the trust and to carry out the settlor’s objectives.
- Lack the time or motivation to properly administer the trust.
- Have difficulty saying “no” to requests from other family members regarding investment opportunities, loan requests and distribution requests, especially when saying “no” could harm those relationships.
- Have conflicts of interest with his/her own financial pursuits.
Choosing a family member can also cause or exacerbate bad feelings among family members:
- A trustee’s power and control over your assets and his/her power to make distributions can cause resentment among beneficiaries.
- Hurt feelings may develop in those family members not chosen, who may feel dismissed or feel that the settlor believes them to be unworthy of trust and respect.
- Serious family strife could develop if the family member fails to effectively manage the trust.
- Choosing an in-law as trustee could become highly problematic in the event of a divorce.
No One in My Family Has The Right Skills to Be a Trustee. What Are My Other Options?
With the above qualifications in mind, you have several other places to look to find the best person to carry out your wishes:
- Business Associates
- Professional Advisors
- Family Trust Companies
Certainly, choosing a trustee is an important decision, so don’t hesitate to contact your Warner attorney for assistance. In the end, with some thoughtful consideration, you can choose the trustee that best meets your needs.
For more information, please see Mark Harder’s article, "Who Can I Trust to Be My Trustee?"