Choosing the Right Trustee

TrustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process. can protect your assets and transfer wealth to family members and charitable causes. But the efficacy of a trustA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process. depends largely on how well it’s managed.

For a revocable or living trust (where assets remain in your control and terms can be altered), ensuring the funds remain in the right hands is simple: Designate yourself as the trustee. Irrevocable trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process. (or revocable trusts whose grantorThe creator of a trust who owns the assets to be transferred. has passed away) are a different story—you need to appoint an outside trustee.

You’ll want to select someone trustworthy, prudent and agile enough to respond to your beneficiaries’ needs promptly over the course of their lives.

Here are four questions to answer to help you choose the right trustee.

What does the trustee do? Trustees have the power to make investment decisions and manage businesses or real estate held in the trust. They are also responsible for filing tax returns and distributing payments to beneficiaries. A trustee is legally liable for their actions—they’ve got skin in the game. In short, being a trustee can be a full-time job, so whomever you pick should understand the commitment involved.

Do you need a professional trustee? The answer depends on your estate and your beneficiaries. Professional trustees can include a financial institution, like a bank, or advisers with significant trustee experience. These seasoned trustees have the resources and technical know-how to properly administer trusts, and they help provide continuity, objectivity and operational experience—especially when serving several generations of a family. The downside of hiring a professional trustee is that they may be less familiar with the needs of your family and less flexible when making distribution decisions.

The other option is to choose individual trustees—typically family members or friends whom the donor trusts to understand and carry out their intentions. Family trustees may need to engage outside investment advisers and other professionals to fulfill their duties. If you have an individual trustee in mind, it may make sense to also appoint a professional co-trustee to lend a hand.

What is the trust’s time frame? Trusts can be set up to last for decades. Or they may terminate upon the passing of a spouse or child. If you’re setting up a trust to benefit several generations, you may need to select a professional institutional trustee to ensure continuity. But even if you intend the trust to dissolve in the short or medium term (say, when a minor child becomes an adult), it’s still wise to provide instructions on how the trust’s beneficiaries should select (or worst case, remove) trustees if your designated trustee resigns or becomes incapacitated.

Will the trustee be paid? Trustees are legally entitled to reasonable fees for their services—professional trustees will often have fee schedules. Generally, the more complex your trust is to administer, the higher the fees. If your trust is relatively simple, with few beneficiaries, an individual trustee might be a better option. Their fees may be lower or even limited to the expenses that they incur for their work on the trust.

Naming a trustee who is knowledgeable, reliable and able to navigate your family’s dynamics should ensure that your goals are achieved and your heirs are cared for as intended. Our estate, tax and financial planning specialists can help walk you through this process. Please don’t hesitate to contact your wealth management team. After all, we are The Planner You Can Talk To.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.