Choosing the right trustee is one of the most important decisions you will make when creating a trust. The person or institution you select will be responsible for managing trust assets, following your instructions, and making decisions that affect your beneficiaries, sometimes for many years.
A trustee should be trustworthy, organized, financially responsible, and capable of acting in the best interests of the people who will benefit from your trust. While many people choose a family member or close friend, others prefer a professional trustee depending on the complexity of the trust and their family’s circumstances.
What Does a Trustee Do?
A trustee is responsible for administering your trust according to its terms and applicable New Jersey law. Their duties often continue long after the trust is created and may extend for decades.
Depending on the type of trust, a trustee may be responsible for:
- Managing and protecting trust assets
- Investing trust property prudently
- Paying expenses, taxes, and debts owed by the trust
- Keeping accurate financial records
- Communicating with beneficiaries
- Making distributions according to the trust’s instructions
In some situations, your trust document may give the trustee discretion when deciding whether a distribution is appropriate. That discretion must always be exercised in good faith and in accordance with the purpose of the trust.
What Qualities Should You Look for in a Trustee?
The best trustee is someone who can make thoughtful decisions, communicate effectively, and carry out their responsibilities without allowing personal interests to interfere.
When choosing a trustee, consider whether the person has:
- Integrity and sound judgment
- Strong organizational skills
- Financial responsibility
- The ability to remain impartial when beneficiaries disagree
- Enough time to handle ongoing responsibilities
- A willingness to serve
Many people choose someone who understands their values and family dynamics. If unexpected situations arise that are not specifically addressed in the trust, a trustee who understands your intentions may be better equipped to make decisions that reflect your wishes.
Should You Choose a Family Member, Friend, or Professional Trustee?
There is no single answer that works for every estate plan. Each option has benefits and potential drawbacks.
A family member or trusted friend may already understand your family’s needs and your long-term goals. They may also provide a more personal approach when communicating with beneficiaries.
However, serving as trustee can be time-consuming and emotionally challenging. If family conflict exists or the trust contains substantial assets, appointing one relative over another can create tension.
A professional trustee, such as a bank or trust company, offers experience managing trusts and handling financial responsibilities. Professional trustees can also provide continuity if the trust will remain in place for many years. The tradeoff is that professional services generally involve ongoing fees and may feel less personal than working with someone you know.
In some cases, naming co-trustees or a successor trustee can provide additional flexibility if circumstances change in the future.
Understanding a Trustee’s Fiduciary Duty
Every trustee has a fiduciary duty to act in the best interests of the trust and its beneficiaries. This is one of the highest legal standards recognized under the law.
A trustee must:
- Follow the terms of the trust
- Avoid conflicts of interest and self-dealing
- Treat beneficiaries fairly
- Manage trust assets responsibly
- Make decisions with reasonable care and diligence
Failing to meet these responsibilities can expose a trustee to legal liability. For that reason, it is important to choose someone who understands the seriousness of the role and is prepared to fulfill it.
Review Your Choice as Life Changes
The person who seems like the right trustee today may not be the best choice years from now. Marriage, divorce, illness, financial difficulties, relocation, or changes in family relationships can all affect whether someone remains a good fit.
We encourage clients to review their estate plans periodically to determine whether their chosen trustee still reflects their wishes. Updating your documents when circumstances change can help avoid complications later.
Make Your Trust Work for the People Who Matter Most
Choosing a trustee deserves careful thought. The person or institution you select will have significant responsibility for managing your assets and carrying out your wishes, often for many years. Taking the time to choose wisely can help your trust function as intended and reduce the likelihood of future disputes.
At E.A. Goodman Law, LLC, we will help you evaluate your options and determine whether a family member, friend, or professional trustee is the right choice for your estate plan. If you are creating a trust or updating an existing one, contact us today to schedule a consultation and discuss how we can help you protect your legacy.
Posted in: Estate Planning, New York Estate Planning