By Lee Sherman
Choosing a trustee to manage your assets once you are gone is one of the most important financial decisions you will ever make.
Once you’ve established a family trust, you’ll need to choose a trustee. As the name implies, a “trustee” is someone you trust — in this case with your estate. It could be a family member, or a trusted friend or business associate. Or you might decide to assign this role to your lawyer, accountant or even a trust company that is in the business of overseeing a trust.
Who you choose is critical. Beyond a comfortable level of trust, it should go without saying that you’ll want someone who you know to be financially responsible and who has an understanding of basic financial principles. At minimum, it should be someone with a good credit history, who pays their bills off in full every month, and who knows how to maintain a budget. If they are known to be frugal, all the better. Note: that whoever you choose as trustee will not be (or should not be) investing your money themselves. Instead, they should continue to work with your financial advisor as you do now.
Financial advisors say you should resist the temptation to keep the management of your assets “in the family”. Of course, this was why you set up a family trust in the first place, to make sure your assets would benefit your loved ones after you’re gone. But people don’t always act in their best interests so it’s often better to hand things off to a professional. While a family member probably won’t charge a trustee fee for administration of your assets, they are ill equipped to deal with any familial disputes that might arise as to where the money should be spent and are far from a disinterested party. If you already have a family accountant that you trust, that person is likely already familiar with your family dynamics and is enough removed that they can make more impartial decisions.
If your family trust involves large sums of money or if you don’t trust (there’s that word again) the warring factions in your family, you may want to consider a trust company. A trust company provides ongoing oversight and can intervene in any disputes that may arise.
Remember that a trustee is legally bound according to state law to act as the administrator of the trust and is responsible for managing all of the assets held by the trust, tax filings for the trust, communicating regularly with the beneficiaries, and distributing the assets according to the terms of the trust. Depending on the size of your estate, it could be a full-time job for the right person.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.