When you create a trust, you must pick a trustee to manage the assets. The trustee has a duty to manage the assets for the benefit of the designated beneficiaries, and this can be a serious responsibility. Depending on the terms of your trust and the assets involved, it can also be a a difficult job.
For these and other reasons, it’s important to choose a person or entity who is up to the task. In some cases, people choose a lawyer, a bank or a trusted friend who has experience in finance. For certain types of living trusts, people can even name themselves as trustee.
In this blog post, we will briefly look at some of the factors you should consider when choosing a trustee.
How long will your trust last?
When choosing a trustee, consider how long your trust will last. If you intend for your trust to outlive you, be sure to consider the lifespan of your trustee. If you name a friend, lawyer or other individual as your trustee, be sure to provide for a successor trustee who can take over the role if your chosen trustee dies or becomes unable to fulfill their role.
Many people choose a law firm, bank or other institution as a trustee because these entities can last for generations. However, it’s important to remember that business entities can merge with others, be bought or go out of business. A well-drafted trust should provide options in case of major changes with your business entity trustee.
Removing a trustee can be hard
The trustee has a fiduciary duty to manage the trust. This means they have a legal responsibility to manage the assets to the best of their ability and they can be found liable if they fail in that duty.
However, removing a trustee can be difficult, particularly if the trust is considered irrevocable.
If the beneficiaries of an irrevocable trust wish to change trustees, they may need to go to court to prove that the trustee breached their fiduciary duty. They may need to get agreement from all — or at least a majority of — the beneficiaries. These cases can be long, expensive and frustrating. You may be able to put provisions in your trust that can make the process somewhat easier.
Choosing a trustee is just one of many things you will need to consider when creating a trust. This is why it’s important to seek out help from experienced professionals.