Trusts have become an increasing popular addition to any estate plan. The reasons for this are varied and numerous. Trusts allow for flexibility when creating an estate plan as well as help your estate avoid probate. In addition, trusts may help decrease your gift and estate tax exposure. When you create a trust you must appoint a trustee. One question we often get asked is “Can you be the trustee of my living trust?” The short answer to that question is “yes”; however, it helped to better understand the duties and responsibilities of a trustee before you make a decision who o appoint as your trustee.
Trusts are broadly divided into two categories—testamentary and inter vivos, or living, trusts. A testamentary trust is one that does not become active until your death while a living trust becomes active as soon as all of the formalities of creation have been satisfied and the trust is properly funded. Living trusts are further sub-divided into revocable and irrevocable trusts. Regardless of the type of trust you choose to create you will need to appoint a trustee.
Your trustee is responsible for over-seeing the management of trust assets and the day to day administration of the trust. All trust distributions are made by the trustee. If you allow for discretionary distributions, your trustee will decide if a distribution is allowable or not. In addition, your trustee is responsible for keeping trust records, investing the trust assets to grow those assets, communicating with beneficiaries, and preparing and filing trust taxes. Your trustee should have at least a basic knowledge of the law relating to trusts as well as some financial acumen and experience.
People frequently make the mistake of appointing a family member or close friend as the trustee of a trust simply because they know and trust the individual. Trusting someone is not sufficient to consider that individual qualified to perform the role of trustee of your living trust. Skill and experience is usually necessary to successfully manage a trust, particularly if the trust contains complex and/or valuable assets. For these reasons, it is advisable to appoint a professional as your trustee. This could include your attorney, a financial planner, or a professional trust management company.
Ultimately, only you can decide who to appoint at the trustee of your living trust; however, you should consult with your Texas estate planning attorney before making your final decision.