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How to Find the Right Estate Trustee

By Wendy Connick - Jul 11, 2017 at 6:05PM

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Setting up a trust for your estate can be an excellent financial move, but you have to find the right trustee.

If you have a substantial estate and you've set up a trust to protect it (and your beneficiaries) from the perils of probate, good for you. However, having a strong trust depends heavily on choosing the right estate trustee. This person will be making all the decisions once you're gone, so it's important to pick someone who will do a good job.

Here are some key qualities you should look for in an estate trustee.

Stick with fiduciaries

A fiduciary is someone with a legal (in addition to moral) obligation to put their clients' interests first. Not all advisors consider themselves to be fiduciaries, and that leaves them open to conflicts of interest. They could, for example, move a client's assets into funds that pay the advisor a commission but are not best suited to that client's needs. The new fiduciary rule requires all advisors who work with retirement plans or provide retirement planning advice to consider themselves fiduciaries, but other financial advisors may or may not act as fiduciaries. The only way to know for sure is to ask the advisor.

So long as they commit to behaving as a fiduciary and possess the necessary knowledge and experience to be a good trustee (see the next section for more on this), any type of financial advisor will do -- be they financial planners, lawyers, CPAs, or some combination thereof.

Last will and testament

Image source: Getty Images.

The right kind of know-how

Your trustee will likely be called upon to make significant decisions about how to manage the assets within your trust, and they need to have the right background to make informed decisions. At a minimum, estate trustees should have both investing and tax backgrounds; depending on the nature of the assets within your estate, other types of experience may be required. For example, if your small business is part of your trust, the trustee should either have business management experience or have access to someone with such experience and instructions to consult him when making decisions about the business. One option is to appoint multiple trustees: a primary trustee with a good level of generalized knowledge, and one or two others with the specialized knowledge that your estate requires.

Plays well with others

When your trustee takes control of the trust, your family will be going through the pain and stress of having just lost you. If your trustee is insensitive or doesn't get along with your beneficiaries, their emotional and financial burden will become even greater. So when evaluating potential trustees, weigh their interpersonal skills as well as their technical and financial skills. And consider bringing your beneficiaries along to meet the potential trustee and see how well they get along.

Longevity

Your 70-year-old uncle may be the perfect choice as a trustee based on the previous criteria, but is he really going to be around after you're gone? When choosing a trustee, it's best to limit yourself to people who are significantly younger than you are and in reasonable health. If you feel that you must name an older trustee, then pick a "successor trustee" as well -- someone who will take the first trustee's place if he or she is no longer available. Another option is to name a business, such as a law firm or financial firm, rather than an individual as your trustee. It's far more likely that an institutional trustee will be available when you need it, but keep in mind that such trustees are generally more expensive than individual trustees, often setting their fees to around 1% of the value of the estate (and if you run across a potential trustee who quotes a fee much higher than that, you should probably look elsewhere). Institutional trustees may also be limited by what they can and cannot do based on their internal company policies rather than your wishes.

Revisit your choice periodically

The trustee you finally settle on may be the perfect person for the job now, but five years from now they may be unavailable, estranged from you, or otherwise a poor choice. It's a good idea to review your estate plan on a regular basis anyway, because your wishes may have changed in many ways -- so you should also reevaluate your trustee as a part of this process.

It's not fun making plans for your own mortality, but it's one way that you can take good care of your family even after you're gone.

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