What to consider when naming a trustee

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Trusts are important tools in estate planning. In the simplest terms, a trust is created when the owner of a property or grantor, transfers legal title of an asset to another individual, the trustee. The trustee holds the asset for the benefit of a third person called the beneficiary. The trustee has a special fiduciary responsibility to the grantor of a trust and also to the beneficiaries. The trustee must carry out the grantor’s intention while doing what is in the best interest of the beneficiary. In carrying out his or her fiduciary duties, a trustee must keep this unique relationship in mind.

To create and implement a trust effectively, you need to name a trustee who you can count on to carry out your intentions. Your trustee should be responsible, reliable and also have the required experience and expertise. He or she should also be able to communicate with beneficiaries. You may choose an individual to serve that role or find that a corporate trustee makes more sense.

Qualities to look for in a trustee

The trustee must be a master of many disciplines. Besides painstaking attention to detail, he or she must be able to focus on the safety of the trust assets through physical custody, as well as efforts to implement an investment strategy. The trustee must also be a skilled recordkeeper, able to account for and report the trust activity while making sure distributions are made on a timely basis. The trustee may also need to engage with other advisors to assist with tax preparation and investment advice. Regular communication with beneficiaries also falls within the trustee’s responsibilities.

A good trustee candidate has the following qualities:
  • Responsible and reliable—Ask yourself whether the person you have in mind will be responsible in exercising his or her powers. Will this person be reliable in dealing with trust assets and in administering the trust?
  • Experience and expertise—Your trustee must have a good understanding of the requirements expected of him or her. Even if all good intentions are present, will the person understand the role and its obligations and duties? Will he or she understand the potential liability in the role? Does the individual have the capability to deal with a wide range of issues, including investing, recordkeeping and filing tax returns?
  • Availability and communication—Your trustee must be available both in terms of accessibility and the time necessary to devote to trust matters. It’s important that this person be able to communicate with and resist pressure from the beneficiaries. At the same time, he or she must be able to treat beneficiaries without favoritism.

When to consider a corporate trustee

You may want to consider a corporate trustee if your trustee candidates feel overwhelmed by the responsibilities, don’t have the sufficient resources to meet all of the trustee’s duties or simply would appreciate having a professional involved to assist them.

A corporate trustee can serve as your sole trustee, or in conjunction with a friend or family member as a co-trustee. When serving as a co-trustee with a family member or other trusted individual, the corporate trustee can provide fiduciary protection for the individual trustees who may not be familiar with the “rules of the road.” The administrative expertise of a corporate trustee can alleviate much of the stress for the individual trustee, freeing up time to focus on the more personal issues of trust administration, such as fulfilling the grantor’s wishes and the needs of the beneficiaries.

By naming a friend or family member with a corporate trustee, you gain a powerful combination of someone who knows you and your beneficiaries, and understands your wishes for the use of your trust property, together with a professional fiduciary providing expert management of the trust assets. If you choose this approach, include a removal power in the document, allowing the beneficiaries or individual trustee to replace a corporate trustee if unforeseen changes or circumstances merit.

When using trusts as part of your estate plan, finding the right trustee or combination of trustees is a decision that shouldn’t be taken lightly. Take an objective look at your options and choose the best combination of expertise, willingness and commitment for your circumstances. TIAA’s Individual Advisory Services can help you decide what’s right for your needs.
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The TIAA group of companies does not offer legal advice. Please see your personal legal advisor regarding your particular situation and the use of any information contained in this article.

Advisory services provided by Advice & Planning Services, a division of TIAA Individual & Institutional Services, LLC, Member FINRA and SIPC, a registered investment advisor.

©2018 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017

This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.