When you estate plan, you have to make many, many decisions. You have to decide how your estate is divided, which heir gets family heirlooms, how assets will be distributed, how to minimize taxes, etc. Simply put, it is a lot.
And, often, we lean on our family and friends to make decisions for us when we cannot or after we pass, like powers of attorney, or POAs, medical proxies, etc. However, for trustees, friends and family are seldom the right choice.
Why are trusts different?
When someone is making decisions on your behalf, like a medical proxy, you trust them to make decisions according to your best interests. Picking that person is about trust. However, trusts are different beasts as they are legal entities that have legal requirements at the state and federal level, and if those legal requirements are not followed, the trust may be dissolved or lose the features you intended it to have, like protection from creditors or from the IRS.
What about my friends and family?
Even if you trust your friends and family, they are still likely not good options for your trustee. Of course, if they are professional trustees, that may be different, but otherwise, due to the legal requirements described above, you should seek the services of a professional trustee or corporate trustee.
Cost of services
When looking for a professional trustee or corporate trustee, the first issue is cost. No matter how good the trustee is, if they are too expensive for your estate, you likely should not use them.
However, comparing fees can be confusing, especially if you are comparing trustees who contract with other providers, like attorneys, CPAs, investment managers, etc. Each of these providers likely charge a fee, which may not be included in the trustee’s fee. This is why you should ask for their comprehensive fee, which includes all fees.
Can the trustee make tough decisions?
Even if you have a family member or friend that is a professional trustee or part of a corporate trustee organization, think about their ability to make difficult decisions. If one of your heirs develops a drug problem, could they tell them “no” until they agreed to treatment, and then, actually set up that treatment? Sometimes, familiarity can make difficult decisions more difficult.
Additionally, you need to know that your trustee can make those decisions. Of course, there are other considerations when choosing a trustee, but we will explore them in upcoming Baltimore, Maryland, blog posts.