A Last Will and Testament usually serves as the foundation of a comprehensive estate plan. For most people, however, a Will is just the beginning of an estate plan. People often choose to add additional documents and estate planning tools to help achieve a multitude of goals and objectives. Though once used primarily by wealthy families as a method to pass down the family fortune, trusts have become an increasingly popular addition to estate plans for people from all walks of life. If you decide to incorporate a living trust into your estate plan, one of the most important decisions you will need to make is who to appoint as the trustee of your living trust.
Though trusts have evolved to the point where there is a trust for just about every objective, all trusts fall into one of two basic categories – testamentary or inter vivos (living). Testamentary trusts do not take effect until the death of the testator. A living trust, on the other hand, will take effect when all of the formalities of creation have been carried out and the trust is properly funded. Regardless of what the primary purpose of your living trust is, you must choose someone to be the trustee. The trustee has a wide range of duties and responsibilities, including a fiduciary duty to the assets held by the trust. In addition, the trustee must communicate with the trust beneficiaries as well as disburse trust funds to the beneficiaries according to the terms of the trust. The trustee will also need to manage the trust funds and make investment decisions.
People often appoint a spouse/parent/child as the trustee of a trust without giving proper consideration to whether the individual is really the best choice. A trustee must have financial skills as well as the ability to understand the legalities of managing a trust. The more complex the trust terms are and/or the higher the value of the trust funds the more complicated the job of trustee is. Sometimes, a family member does not have the background or skills necessary to carry out the job of trustee.
Before you decide who to appoint as the trustee of your living trust take the time to consider the duties and responsibilities that go along with the job and whether or not your potential appointee has the background and skills needed for the job.
Stephen A. Mendel, Estate Planning Attorney
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