Selecting a Trustee

A Trustee should be someone that a client trusts and believes can work well with the beneficiaries of the trust. The decision as to whom should be appointed as a Trustee is something that should be carefully considered and not made lightly. Below is a brief discussion as to some things that should be considered when selecting a Trustee:

 

 

Trustee Functions and Responsibilities

Here is a list of some of the functions and responsibilities of a Trustee:

  • The Trustee should be familiar with, and understand, the terms of the Trust
  • The Trustee should be familiar with the state’s Uniform Trust Code (MUTC) and Prudent Investor Act (PIA)
  • The Trustee must maintain complete and accurate records and make them available to the beneficiaries
  • The Trustee should understand, and plan for, the estate, gift and generation skipping transfer tax consequences of particular trusts

Additionally, every Trustee has the following duties:

  • The duty of skill, care and loyalty
  • The duty to furnish information to, and communicate with, beneficiaries
  • The duty to avoid conflicts of interest
  • The duty to segregate property
  • The duty of impartiality regarding current and future beneficiaries
  • The duty to enforce and defend claims of the trust

Additional Tips:

  • Be aware of potential financial scams
  • Be aware of potential problems between and among the beneficiaries
  • Some professionals such as investment advisors, attorneys and CPAs may need to be engaged

Child/Beneficiary Trustee vs. Independent Trustee

Some clients choose a child or beneficiary to serve as Trustee. The main advantage to this is that they may have more familiarity with the trust assets and family dynamics. However, there are a number of disadvantages with choosing a child or beneficiary as a Trustee. One disadvantage is that a he or she is asked to perform a full time job without the requisite knowledge of familiarity of administering a trust. Administering a trust can be very time consuming, and family members often choose not to be compensated for their time, even though the trust may allow for it. Further, any contention between the Trustee/beneficiary and other beneficiaries may fracture their personal relationships.

An Independent Trustee on the other hand is an individual that has no beneficial interest to the trust, and can include a friend, attorney, CPA or Trust Company. One disadvantage to having an Independent Trustee is that he or she may charge the trust for the work performed. However, under Massachusetts law a Trustee may charge a reasonable fee for his or her services. Therefore this, coupled with the power of beneficiaries to remove a Trustee, allows for some accountability by the Trustee to perform his or her duties well and to not over charge for their services. Furthermore, an Independent Trustee may be more objective as to the needs of the beneficiaries and may be more willing to say “no” to beneficiaries if they make unreasonable requests.

In conclusion, a Trustee should be carefully chosen by a client. It should be someone that the client believes will follow the terms of the trust and can perform all the required duties of a Trustee.

About the Author

Avatar Peter Moustakis
Peter Moustakis is the Managing Member of Sowerby & Moustakis, PLLC with locations in Massachusetts and New Hampshire. Peter has received an award related to estate planning, contributed to 2 family law publications and authored the book “Estate Planning and the Modern Family: Old School Meets New School. He is a former President, Vice-President, Secretary Treasurer and Education Coordinator of Business Networking International Commerce Connection in Wayland, MA. He is also the former vice chair of the animal law committee at the Massachusetts Bar Association and served on the New Hampshire Bar Association Ethics Committee. Peter believes that community service is important and has served on the Amherst town Ways and Means Committee for 4 years and was chair of the committee for 2 years.