If you’re contemplating establishing a trust, an important decision you need to make is regarding who you will select to serve as the trustee. The reality is that there are a number of important facts and factors that you need to consider when it comes to the all-important task of selecting a trustee for your trust.
What Is a Trustee?
In basic terms, a trustee is the person placed in a position to protect, safe keep, and conserve the assets of a trust. A trustee is obliged to prudently invest money in a trust in a safe manner that nonetheless provides an optimal financial return to the beneficiary or beneficiaries of the trust. A trustee has a fiduciary duty to the trust and its beneficiaries (a significant legal responsibility that will be discussed in greater detail in a moment).
What Is a Fiduciary Duty?
A fiduciary duty is considered the highest or most significant legal duty or responsibility owed to another person – in this case, it is precisely the legal obligation owed by a trustee to a trust beneficiary. A trustee has the fiduciary duty to a beneficiary in a manner designed to benefit only the trust and its beneficiary or beneficiaries. A trustee can never make decisions or take actions that are designed to benefit his or her self when it comes to the affairs of the trust.
Who (Or What) Can Serve as a Trustee?
You actually have fairly considerable flexibility when it comes to selecting the type of person or entity you desire to serve as the trustee of your trust. In California, the trustee can be an individual or it can be an institution (like a bank). Banks commonly have trust departments that assist their customers in this capacity. The type of person or entity you select to serve as a trustee depends significantly on the type of trust you intend to create and the nature of the assets contained in that trust.
What Are Specific Attributes of an Ideal Trustee?
There are a number of specific attributes associated with a trustee that you must bear in mind when you are seeking a person to fill this role.
Overriding all other attributes you will want to seek in trustee is trustworthiness. You need to select a person that has a reputation for demonstrable trustworthiness.
A person selected to serve as a trustee needs to have the ability to deal with issues that include investing and money management. For this reason, individuals who are attorneys, financial managers, and accountants fairly regularly are called upon to serve as trustees.
While it’s not necessary that a person previously served as a trustee, that can be helpful. If an individual has not served specifically as a trustee, it can be very helpful if an induvial selected as a trustee has experience in dealing with the types of matters that need to be tended to in regard to a trust.
Communication between the parties to a trust is vital. Thus, you will want to select a person as the trustee who has the capacity for clear and prompt communication. The reality is that oftentimes when issues arise between a trust grantor (the person who creates a trust in the first instance), the trustee, and the beneficiaries, those problems are associated with some sort of communication breakdown. If not the actual cause, communication shortfalls aggravate another issue.
Associated with being trustworthy, you also want to select a person as trustee that has a background generally suitable to this type of position. By that it is meant you ideally should avoid a person who is in the midst of a bankruptcy or has gone through one in fairly recent times (perhaps using a five to 10-year cutoff makes sense). You also are wise to avoid selecting a trustee that has some sort of criminal record involving crimes that impact a person’s trustworthiness.
Willingness to Serve:
Finally, when contemplating who to select to serve as a trustee, you need to be sure you focus on a person who has the willingness to serve. If you choose someone who is reluctant to assume this role, you can end up with a trustee who ends up wanting out of the role. You may also find that if a person isn’t genuinely willing to serve in this capacity that he or she will not pay appropriate attention to the affairs of the trust.
Designating a Successor Trustee
The day may come when the trustee you select in the first instance is unable to serve in that capacity. In order to be proactive, you should designate at least one successor trustee in your trust instrument. This is the person that takes over in the event that the first trustee selected needs to step aside for one reason or another. Some people select an individual to serve as the initial trustee and then select either a person younger in age as a successor or choose an institution like a bank to serve in the successor capacity.