Should Uncle Joe Really Be Your Trustee?
The proper choice of a trustee is a crucial decision if you wish to create a dynasty trust that will last for the long term. The right trustee will have a huge impact on the longevity and potential success of your trust.
At first, it may seem that a trusted family member will be the sensible choice for this situation. You choose Uncle Joe as the perfect trustee. He has known each of your children since they were born, and he seems to be very financially responsible. Since he is part of the family, he is going to have your best interests and your children’s best interests at heart.
There are some other things to consider when looking at Uncle Joe as the trustee for a dynasty trust that is meant to last for several generations. Will he be in a position to handle the financial obligations that can arise while administering this trust? Or will he need to hire advisors to help him with the various legal and tax questions that will certainly arise? These types of expenses can begin to compound over time. They may eventually even cost more than it would cost to simply hire a corporate trustee from a bank or trust company. Corporate trustees are usually set up to handle any financial obligations under one blanket fee.
Here are a few issues that you should consider when making the choice of a trustee for your dynasty trust. These items may cause you to look at a corporate trustee rather than dear ol’ Uncle Joe.
- Will the trustee’s personal life possibly cause disruption to the administration of the trust? While Uncle Joe may have major life changes that could affect his ability to administer your trust, a corporate trustee will carry out the administration of your trust as part of his job. His personal life will not become an issue in this task.
- Will your trustee possibly have a bias toward or against one of the beneficiaries? Uncle Joe will know your children and their personalities. He may have a favorite or one he doesn’t particularly care for. A corporate trustee will be able to carry out your exact wishes without his own personal biases toward any of the beneficiaries.
- Will your trustee administer the trust without any self-interest or conflicts of interest? Uncle Joe might be tempted to sell the family vacation home to himself or a friend for less than its true value. A corporate trustee will not be able to take steps like this.
- Corporate trustees avoid conflicts of interest – You don’t have to worry about a corporate trustee selling something you wanted to hand down to your grandchildren. He or she will not sell a home or company to themselves or a friend at a price lower than the fair market value.
- Corporate trustees invest appropriately – A corporate trustee will invest where you have specified. He or she will invest in a variety of places to diversify the portfolio benefiting the beneficiaries now and in the future.
- Corporate trustees have expert knowledge – When using a corporate trustee they will understand the laws and will keep up to date on any changes regarding trusts, fiduciaries and taxes. He or she will not need to hire attorneys or accountants to help understand the trust.
A trustee’s responsibilities and duties are great. The requests and needs of the beneficiaries now and in the future need to be managed. Reports of the assets, liabilities, receipts and disbursements to the beneficiaries need to be created regularly. Assets are to be invested wisely. Tax forms also need to be prepared and filed. The job seems to go on and on.
With so many responsibilities to being a trustee or your dynasty trust, a corporate trustee may be a better choice than Uncle Joe. Please call our office with any questions concerning choosing the right trustee. We can help you make an informed decision.