Asking a friend or family member to serve as your Trustee is a significant moment. You’re asking this person to accept the responsibility of ensuring that your instructions are carried out and your beneficiaries are taken care of. In fact, as a fiduciary, your trustee will be required to put the needs of the beneficiaries first. Here are some important discussion points to consider – so that your Trustee can make an informed decision before accepting this important role:
Goals of Trust
While a trust should include language about your intentions and purpose, a direct discussion with your Trustee can add clarity. You can talk through examples and “what if” scenarios.
Is your over-arching goal to preserve wealth to pass on to future beneficiaries or to see to the current generation’s every want and whim? How liberally should your trustee interpret “health, education, maintenance, and support?” – (the most common standard used). What about family relationships? Are there —any potential issues to be aware of? Or, for example, how should your trustee handle a spendthrift beneficiary (—a beneficiary that doesn’t handle money well)? This conversation may even prompt a “Memorandum of Intent” to provide written guidance to your trustee.
Professional Resources Available to the Trustee
Consider your Trustee’s comfort level with the types of assets in the Trust, as well as accounting and tax considerations. Will you be appointing any Co-Trustees? If so, how will the responsibilities be divided up? Does the Trust appoint any professional Co-Trustees? If not, will various experts be available to your Trustee for handling more complex situations or high-value assets?
Trustee’s Potential Liability
Generally, the Trust should include language about a Trustee’s personal liability. A Trustee, —particularly a friend or family member not acting in a professional capacity, —is usually not held personally liable for their efforts except for in cases of gross negligence or an intentional violation of Trust terms. This language will be important to review and discuss.
While a professional Trustee is always compensated by the trust, a friend or family member serving as Trustee may or may not be compensated. It’s important to talk about this up front. Some Trustees may prefer not to be compensated; others may need to be compensated for their time and effort due to their own financial circumstances. Additionally, if the Trustee is one of several beneficiaries, it may be reasonable to compensate the beneficiary who is putting in the time and effort to administer your Trust.
Is the Trustee’s term fixed or indefinite? What are the requirements for resignation? How does the Trustee resign, and how is a successor Trustee put into place? All of these questions should be discussed and addressed in your Trust.
Once your Trustee has accepted the role, you may want to have them read through the Trust so that any of their questions about your intentions or the Trust’s language can be answered. Knowing that you’re both on the same page and sharing in the significance of the relationship will bring you and your Trustee peace of mind.
Trustee selection is one of the things we help our clients with as we design their estate plans. If you’d like to work with us, Roth Elder Law, PLLC would be happy to start that conversation. Call us today to schedule an initial meeting at 607-962-6162 or complete this intake form and we’ll be in touch.