Along with determining who will inherit your property upon your death, one of the most critical estate planning choices is selecting the appropriate Trustee. This decision may make the difference between a calm, effective administration of your estate and one that is fraught with difficulties.
People often think that a family member, a close friend, or an attorney should manage their family’s trust. A trustee’s work is time-consuming, highly technical, and laden with possible responsibility. It may continue for years, if not decades. The Trustee will continue to be in charge of asset management and distribution to your beneficiaries. This article will help you in choosing the appropriate individual as your estate’s Trustee.
What is a Trustee?
A trustee is someone accountable for managing money or property that has been put aside in trust for the benefit of another. As a Trustee, you are responsible for using the trust’s funds or assets only for the beneficiary’s benefit. As a trustee, everything you do must be for the benefit of the beneficiary. The trust agreement may explicitly specify the role and responsibilities of a trustee.
For instance, the trust agreement may provide that the trust covers the costs of an older person’s care. If this is the case, you will be unable to utilise the funds for other purposes. You will be unable to profit personally from the trust – unless the trust agreement says explicitly otherwise.
Who can be appointed as a Trustee?
Selecting the appropriate Trustee may be a complex process. However, there are several factors that you may consider to increase your confidence in your choice.
Family members or Relatives
Appointing family members or near relatives to be appointed as a trustee or Trustees is a common practice. But sometimes, it may result in family conflict and even hatred. However, if you have a trustworthy friend, relative or family member, the peace of mind offered by this alternative may be worth it. Someone close to you will undoubtedly benefit from familiarity with and knowledge of your family life. Ascertain if he or she is eager to accept the assignment.
Lawyer/Attorney
Appointing a Lawyer as a trustee is an excellent choice if no close family member or friend is available to take on the job. Suppose you can’t make up your mind and are concerned about disputes among your loved ones, hiring a non-biased third party, such as a lawyer, maybe a suitable option.
Another advantage of having a long-term connection with your attorney is that he or she will have insight into your family.
Why Professional Trustee is the better option? – Important Considerations when Selecting a Trustee
The Trustee must be prepared for a significant amount of time-consuming labour. To perform their duties effectively, they must be meticulous record keepers with an extensive understanding of financial and legal issues. The Trustee must be capable of collaborating with and managing various specialists, such as lawyers, accountants etc.
Consider the following considerations before making this critical choice:
Capacity for Making Difficult Choices
Individuals may lack the skills and resources necessary to make objective judgments. Certain people may lack the capacity to say “no” when required, and if they do, the beneficiary’s relationship with the particular Trustee may deteriorate.
Professional trustees such as Attorneys are unbiased in their decision-making about the beneficiaries and will manage the trust in line with its provisions and relevant legislation. Trust officers with experience make significant distribution choices based on their professional knowledge of trust provisions, beneficiary circumstances, and beneficiary wishes.
Maintaining Records and Accounting
Administering a trust entails various duties, including the filing of tax returns, the distribution of periodic statements, and the maintenance of records of trust account activities.
For instance, trusts are required to maintain separate income and principal records for accounting reasons.
Trustees must record the trust’s income, deductions, gains, and losses, as well as money that is accumulated, retained for future distribution, or given to beneficiaries. Family members or other people assigned to this position may find this duty difficult and time-consuming. Additionally, any mistakes, omissions, or late filings may expose the Trustee to substantial penalties and personal responsibility if the beneficiaries suffer a loss as a result of the Trustee’s errors, omissions, or late filings.
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Responsible for the protection of Assets
Individual trustee-administered trusts are seldom examined, resulting in possible mismanagement of the trust being unnoticed and rectified, even if unintentional. A trustee’s responsibilities include maintaining records, supervising beneficiaries, and investing the estate plan’s assets. While professional trustees are familiar with these issues, the majority of others are not. If the Trustee fails to execute his or her responsibilities correctly, the beneficiary may sue. It is often prohibitively costly and causes non-professional more stress than anticipated.
Acceptance of Obligation
Even if a trustee acts in good faith and unintentionally violates legal requirements, the Trustee may be solely accountable. Inadequate accounting, mismanagement of property, conflicts of interest and improper investment choices are reasons a dissatisfied beneficiary may take legal action against the Trustee.
A professional trustee is prepared to avoid such responsibility and is further protected by insurance. Furthermore, corporate trustees maintain bookkeeping procedures that guarantee careful accounting of revenues and expenditures and correct reporting to beneficiaries and tax authorities.
The purpose of this article is to provide an overview of the subject. It does not create any legal advice. Contact HHS Lawyers and Legal Consultants now if you need help through the trust administration procedure. Typically, we have relationships with accountants, financial advisers, and real estate professionals who can assist with trust administration, if necessary.
