Choosing a Family Member as Trustee
If you want your trust to last decades for your children, choosing the right trustee is critical to the trust’s longevity and ultimate success.
Initially you may think that a family member, (“Uncle Bobby” to your children), will be the best choice as trustee. After all, Uncle Bobby understands the personalities and varying needs of your children. Since Bobby has always been frugal, he will surely keep the costs of administering the trust down. These are good reasons to possibly select a family member, like Bobby, to serve as trustee. If Bobby is a professional who is responsible this might be a reasonable choice.
However, Uncle Bobby may not be a good trustee. Uncle Bobby may not be able to handle all of his fiduciary obligations on his own. Instead, he will need to hire legal or financial advisors to ensure the trust is being managed and invested as required. These expenses will add up and may ultimately cost more than the fees of a corporate trustee. Many corporate trustees can handle all of these fiduciary obligations under one roof and for one comprehensive fee.
Here are five reasons why a corporate trustee may be right for your trust rather than Uncle Bobby:
- A Corporate Trustee Doesn’t Have a Potentially Disruptive Personal Life. A corporate trustee won’t become ill or die, get married or divorced, or have children or grandchildren. A corporate trustee will not go on an extended vacation or move to a foreign country. Most importantly, a corporate trustee won’t be distracted by day-to-day life that can get in the way of properly administering your trust.
- A Corporate Trustee is Unbiased. A corporate trustee won’t favor one of your children over another (unless that’s what you intended). A corporate trustee will act in an unbiased manner in making distributions that will benefit both the beneficiaries. The corporate trustee will act as objectively as possible under the circumstances in order to limit their liability.
- A Corporate Trustee Avoids Conflicts of Interest and Self-Dealing. A corporate trustee won’t sell the cabin or farm to himself or a friend at less than fair market value. A corporate trustee will sell assets for their fair market value in arm’s length deals.
- A Corporate Trustee Invests Appropriately. A corporate trustee won’t invest all of the trust assets in a money market, real estate, or hedge fund but will diversify the portfolio to benefit both the current and remainder beneficiaries (subject to any specific instructions you list in the trust agreement).
- A Corporate Trustee Has Expert Knowledge. A corporate trustee won’t need to hire a slew of attorneys and accountants. A corporate trustee has internal resources to handle accounting, interpret the trust, and keep current on law changes.
Final Considerations in Choosing a Trustee in Minnesota
The duties and responsibilities of a trustee are extensive. They must manage the requests and expectations of beneficiaries and provide periodic reports of trust assets, liabilities, receipts and disbursements. Trustees must also prudently invest trust assets and prepare and file all required tax forms. The work of a trustee seemingly never ends.
Because of the breadth of duties and responsibilities, a corporate trustee, rather than Uncle Bobby, may be the best option for your trust. Contact our office if you have questions about the selection of a trustee generally or the use of corporate trustees. We can assist you in selecting the right individual or entity to serve as your trustee.
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Zach Wiegand is a Burnsville estate planning attorney and the owner of Gold Leaf Estate Planning, LLC. Gold Leaf Estate Planning is an estate planning law firm that handles probate and trust administration in Minnesota. We serve the Twin Cities with a focus on estate planning for clients in Burnsville, Eagan, Savage, Prior Lake, Lakeville, Apple Valley, Eden Prairie and the South Metro. The firm also handles probate in Dakota County, Washington County, Scott County, Hennepin County, and Ramsey County. Zach was named a Minnesota Super Lawyer – Rising Star for both 2017 & 2018. Zach is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.
