Have you ever wondered how to choose the right trustee for your living trust? Someone who will honor your wishes and manage your trust well after you pass away or if you become incapacitated?
Many of my clients have the same worry. In fact, a lot of people put off doing a living trust simply because they don’t know who to name as trustee. So let me help you get unstuck.
By the end of this article, my goal is for you to know exactly who your trustee is going to be, so you can finally get your living trust done. We’ll cover what a trustee is, what a trustee does, and how to choose the right one for your family.
What Is a Trustee of a Living Trust?
A trustee is a person or an entity responsible for managing and administering the assets held in your trust. The trustee acts as a legal custodian of your assets, like your home and your money, and has a fiduciary duty to act in the best interests of your beneficiaries.
In plain terms, the trustee carries out the wishes you laid out in your trust document. Your trust might say that when you pass away, everything goes to your children equally. Or it might be more specific, like leaving everything to your children but not letting them manage the assets until each of them turns 30.
If that’s your plan, you probably don’t want your children in full control right away, because they might not be motivated to follow your instructions and could simply spend it all. So you name a trustee you trust to manage the assets responsibly until your children reach the right age, and to make sure they actually receive what you left them.
What Are a Trustee’s Duties?
Here is what a trustee actually does. As you read, put the person you have in mind through this test and ask whether they could handle each of these.
Manage the Trust Assets
If you own a house or have money, the trustee takes control of it for your beneficiaries. For a home, that means keeping homeowners insurance in place, handling repairs, and making sure property taxes are filed and paid. For money in the bank, it means managing those funds on behalf of your beneficiaries. Even if your trust leaves everything to your children right away, someone still has to step in when you pass away, take control of the assets, and carry out the administration.
Your trustee does not need prior experience managing property, but they do need to be responsible and trustworthy. Remember, a trustee is not supervised by a judge. One of the biggest benefits of a trust is that your family avoids probate court, which is public and can take two to three years. The trade-off is that there is no third-party supervision, so a dishonest trustee could take assets for themselves instead of giving them to your children. It happens. Choose someone you truly trust.
Make Investment Decisions
A trustee has a duty to invest your assets, especially if they have to hold them until your children reach a certain age. The trustee can’t just put a million dollars in a bank account and let it sit there. They don’t have to be a financial advisor or a CPA, but they need to be responsible with money and willing to learn how to invest it. If you own rental property, the trustee needs to keep managing it to maximize rental income for your beneficiaries.
Distribute Assets to Beneficiaries
This is the main goal. The trustee makes sure the right people receive the right assets. If it’s 50/50 between two children, the trustee handles that.
If you don’t want your children to control their inheritance until a certain age, choose a trustee who knows your values. That way, when a beneficiary makes a request, the trustee can say yes or no in line with your principles. For example, if your 16-year-old asks the trustee to buy a Lamborghini, the trustee can say no, even if there’s money in the trust to do it. The trustee has the legal power to say yes or no depending on how your trust is structured. Of course, if that reflects your own lifestyle and values, the trustee could say yes. Just make sure your trust gives the trustee that authority.
Pay Debts and Taxes
Before distributing anything, the trustee has to pay off your personal debts, like medical bills, credit cards, and personal loans. A mortgage doesn’t necessarily have to be paid off in full if the trust can refinance, but personal debts must be settled before the rest goes to your beneficiaries.
Ensure a Smooth Administration
Overall, the trustee makes sure everything is carried out according to your wishes, smoothly and without problems. They must act in line with the trust document and always in the best interests of your beneficiaries. If they break that fiduciary duty and start taking assets for themselves, they’re in serious trouble, and your beneficiaries can sue them.
So start thinking. Can the person you have in mind do all of this? If yes, you may have found your trustee. If no, keep looking.
How to Choose the Right Trustee
Choosing the right trustee is the part people get wrong most often. Plenty of people set up a solid trust and then name someone who simply isn’t fit for the job. Here are the key things to consider.
Trustworthiness
This is by far the most important quality. Choose someone you trust completely to carry out your wishes and act in your beneficiaries’ best interests. If you don’t fully trust one person, you can name co-trustees who work together as a check on each other.
Competence and Expertise
Look for someone with the financial and organizational skills to manage your assets and fulfill their duties. If you own rental properties, it’s nice to have a trustee who also owns rental property. It isn’t required, but choose someone you’d trust with the kinds of assets you own.
Compatibility
Consider the person’s personality and communication style. They should be able to work well with your beneficiaries and everyone else involved. Don’t name someone your beneficiaries can’t stand.
Impartiality
If you have multiple beneficiaries, choose a trustee who can stay neutral and make fair decisions without conflicts of interest.
Consider a Professional Trustee
Some of my clients name a corporate or professional trustee. All the major banks have trustee departments you can hire and name in your trust, and there are smaller companies whose only job is administering trusts. This can be a good fit for blended families or clients with complex assets who feel a professional should step in.
Interview a few and ask about their rates, because for many people the fees are the deciding factor. Find a professional trustee that fits both your budget and the type of assets you own.
Availability and Longevity
Make sure the trustee has the time, energy, and willingness to commit for the long term, especially if your children are young. Consider the person’s age and whether they’ll realistically be around when your children are 30, 40, or however old they’ll be. And don’t name someone who is unwilling, because they’ll simply decline the role when the time comes. Always ask the person first and confirm they’ll accept the responsibility.
Ready to Set Up Your Trust the Right Way?
Hiring a lawyer is always best, but if it’s not in your budget, you have another option. My fees typically start around three to four thousand dollars, which isn’t realistic for every family, so I created a free class to help.
Take the free trust class. I pull back the curtain and show you exactly what I do for my clients, including how to choose the right trustee, so you can make your own living trust the right way and protect your house from probate without mistakes. Register at freetrustclass.com. Even if you plan to hire a lawyer, watch it first so you understand the process and how to hire the right attorney.
Book a free phone consultation. If you would rather have it handled for you, talk with our team about a plan built around your family. Call us at (408) 412-1913 or visit treeoflife.legal.
Subscribe on YouTube. I post new videos every week on living trusts and how to do it yourself.
My goal is to help you keep more money in the family and give you the peace of mind you deserve.
Disclaimer: I am not your lawyer, and this article is not legal advice. It is information only. Reading it does not create an attorney-client relationship. If you have a legal question, please talk to a lawyer.
