Last Updated: June 1, 2010
Few things in life are more difficult than choosing a trustee. Special care and attention must be given when naming a trustee for your trust. A trustee will manage your financial affairs in the event of incapacitation or death. According to FPA member, Amy Jo Lauber, CFP®, director of financial planning at Harold C. Brown & Co., LLC, you should consider the following when selecting a trustee:
- Choose someone you trust.
- Choose someone who is able to perform the duties. Ideally the person you select should have knowledge and wisdom and can apply both in his or her duties as a trustee.
- Choose someone who is willing to perform the duties. Not everyone is comfortable taking on this responsibility, especially if they could be held liable for their actions.
- Consider the type of trust. Some trusts allow the trustee to have discretion over the trust's disbursements. Your trustee must be able to exercise good judgment and understand the beneficiary's situation as well as the trust's purpose.
- Consider the trust's beneficiary's personality. Relationships may become strained under these circumstances. Your trustee must be firm but understanding. If no family member or friend is suitable, a corporate trustee may be appropriate (such as a bank or trust company), or even a professional adviser such as an attorney or financial professional. Your trustee may provide asset management services as part of their fiduciary duty or may hire outside asset managers. It is best to discuss this part of your trust management prior to naming a trustee, and share the results with your attorney so that he or she can draft your trust document accordingly.
- Have a contingent trustee named if your original choice cannot serve. Have your attorney draft specific language into your trust document that specifies how and when a trustee may be removed, and by whom.
If you need help evaluating and selecting a trustee, consider hiring a financial planner. A financial planner can help you determine if a potential trustee meets the criteria established above.