Trusts are a common addition to a comprehensive estate plan because of the numerous and varied benefits a trust offers as well as the flexibility offered by the terms of a trust. Although the name implies the need to be “wealthy”, family wealth trusts are frequently used by families with moderate to large estates as a way to pass down the family assets. If you are considering the addition of a family wealth trust to your estate plan, you may be asking yourself “Who is the trustee of my family wealth trust?” There is no simple answer to that question; however, a broader knowledge of trusts and trustee duties, along with a consultation with your estate planning attorney, may be helpful in arriving at an answer.
Trusts are divided into two broad categories and then subdivided again into two categories. The first division is into testamentary and living trusts with a testamentary trust not taking effect until you die while a living trust takes effect as soon as the formalities of creation have been completed and the trust is sufficiently funded. Trusts are further divided into revocable and irrevocable. As the names imply, a revocable trust can be modified, changed, or terminated by the maker at any time while an irrevocable trust cannot.
All trusts require the appointment of a trustee. The trustee of a trust is responsible for administering the trust and managing the trust funds. In most cases, the maker of a trust can also be the trustee of the trust. Just because you can be the trustee of your trust doesn’t always mean you should be the trustee. Appointing yourself as the trustee of the trust allows you continued control over the trust assets; however, there are important reasons why you might not want to be the trustee of your own trust. Tax considerations are the most common reason why being the trustee of your own trust may not be a good idea. If the purpose of the trust is to avoid the payment of estate taxes in the assets held by the trust, appointing yourself as the trustee can defeat that purpose. This, along with other reasons, may prompt you to consider appointing a professional trustee for your family wealth trust. Not only does appointing a professional trustee avoid any unwanted tax issues, but a professional trustee also ensures that the trust will be professionally managed, the funds invested by an expert, and any potential conflicts with the beneficiaries avoided.
Always consult with your Texas estate planning attorney before making important decisions such as who to appoint as the trustee of your family wealth trust.
Stephen A. Mendel, Estate Planning Attorney
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