Appointing a Trustee for the trust you create is one of the most important decisions you will make when creating or updating your estate plan. A Trustee is responsible for managing the trust assets, ensuring that your wishes are carried out, and distributing the trust property according to the terms of the trust agreement. This is a role that requires trustworthiness, financial acumen, and a deep understanding of legal and fiduciary responsibilities. To help you make the right choice, the Indianapolis attorneys at Frank & Kraft discuss what to consider to ensure that you appoint the right Trustee for your trust.
- Trustworthiness and Integrity: Perhaps the most important quality in a Trustee is trustworthiness given that the Trustee will be handling assets on behalf of beneficiaries and will need to manage them responsibly. You must have complete confidence that the person or institution you appoint will act in the best interests of the trust and its beneficiaries. Your Trustee must adhere to the highest ethical standards, even when faced with difficult decisions or personal challenges.
- Financial Competence: Managing a trust often involves complex financial responsibilities, meaning that your Trustee will need to invest trust assets prudently, file tax returns, manage income and expenses, and ensure that distributions are made according to the terms of the trust. For this reason, the Trustee you choose should have a good understanding of financial management. While the Trustee can always hire professionals such as accountants or financial advisors, it is beneficial if they have a foundational understanding of financial matters. If you do not have someone with financial expertise in mind, consider appointing a professional Trustee or a corporate entity with fiduciary experience.
- Familiarity with the Law and Fiduciary Responsibilities: A Trustee must understand and comply with state and federal laws that govern trusts, including fiduciary obligations. A fiduciary duty requires the Trustee to act in the best interests of the beneficiaries and manage the trust assets with the care and skill that a prudent person would use. If your Trustee does not have a legal background, they should at least be willing to seek professional guidance when necessary. An awareness of fiduciary responsibilities is critical to avoid potential conflicts or legal issues that may arise during the administration of the trust.
- Availability and Commitment: Serving as a Trustee can be time-consuming, depending on the size and complexity of the trust. A Trustee will need to be available to manage trust assets, respond to beneficiary inquiries, and handle administrative tasks, such as preparing reports or filing taxes which could require significant time and attention over many years. Before appointing someone as your Trustee, make sure they understand the time commitment involved and are willing to devote the necessary effort. Ideally, your Trustee should be someone who can commit to serving for as long as necessary, especially if the trust is intended to last for many years, such as in the case of a trust for minor children.
- Impartiality: Your Trustee must be impartial, especially when multiple beneficiaries are involved. They must be able to make decisions that are fair to all beneficiaries, even if they are family members or close friends. If you anticipate family conflicts or emotional ties affecting objectivity, it might be best to appoint a professional Trustee.
- Consider Appointing a Professional Trustee: If your trust is particularly complex, contains significant assets, or involves potentially contentious beneficiaries, a professional Trustee or a corporate Trustee might be the better option. A professional Trustee, such as a trust company, attorney, or bank, has experience managing trusts, handling investments, and navigating legal requirements. They can also provide the impartiality that a family member or close friend may lack.
Can We Help You Appoint the Right Trustee?
For more information, please join us for an upcoming FREE seminar. If you need help to ensure that you appoint the right Trustee for your trust, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.Read More!
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