Like many people, you may have decided to incorporate a living trust into your comprehensive estate plan. If so, you will need to make some important decisions during the creation of your trust that will directly impact the success, or failure, of your trust. Among the most important of those decisions is your choice of a Trustee. To help you choose the best Trustee for your trust, the Waukegan living trusts attorney at Hedeker Law, Ltd. discuss some of the factors that should be considered when selecting a Trustee.
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. All trusts require the following five elements for creation:
- Settlor – the person who creates the trust. A Settlor may also be referred to as the Grantor or Maker of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary – a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets.
- Terms – created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding – almost anything of value can be used to a fund a trust, including cash, securities, and real property.
All trusts fall into one of two broad categories – testamentary or living trusts. A testamentary trust is one that is typically activated by a provision in the Settlor’s Last Will and Testament after the death of the Settlor. A living trust, as the name implies, activates during the lifetime of the Settlor once all formalities of creation are complete, including the appointment of a Trustee. Living trusts can be revocable or irrevocable.
What Does a Trustee Do?
All too often, first-time Settlors appoint someone as the Trustee of a trust without actually knowing what the duties and responsibilities of a Trustee are. As a result, many spouses, parents and adult children end up as Trustee without knowing anything about the job. To increase the odds of your trust succeeding, you need to learn what your Trustee’s duties and responsibilities will be so that you appoint the right person. Your Trustee will be responsible for:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
Factors to Consider hen Appointing a Trustee
When it comes time to appoint the Trustee of your living trust, take the time to consider some important factors, including:
- What is the trust purpose? A trust can help achieve a wide range of estate planning goals. The purpose of your trust may impact your choice of Trustee. For example, if your trust is an incapacity planning tool you will appoint yourself as the Trustee; however, if your trust purpose is asset protection or protecting a minor’s inheritance, not only should you not appoint yourself as the Trustee but you should really consider appointing a professional Trustee.
- What type of assets are you planning to use to fund your trust? Are you planning to transfer real property or securities into your trust? If so, your Trustee should have the requisite experience managing and/or investing those type of assets.
- How valuable and/or complex is your trust? A trust can be extremely simplistic or equally complex. It can hold a modest sum or a large fortune in assets. The more valuable and complex your trust is, the more important it will be to appoint a Trustee with a legal and/or financial background.
- Who are the beneficiaries? It can be tempting to appoint someone close to you as your Trustee simply because you trust that person to always have your best interests at heart. Doing that, however, can also significantly increase the risk of conflicts if your Trustee has a personal relationship with the trust beneficiaries.
Contact a Waukegan Living Trusts Attorney
For additional information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding the appointment of a Trustee, contact an experienced Waukegan living trusts attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.