How to Choose a Trustee

By Ronald A. Fatoullah, Esq. and Debby Rosenfeld, Esq.

{4:35 minutes to read} When an individual creates a trust, he is required to appoint a separate person or entity, a "trustee," to manage the trust either currently or in the future, depending on the type of trust. Choosing the right trustee is crucial to making sure one's wishes are carried out. The choice is important because being a trustee can be a difficult job; the duties include making proper investments, paying bills, keeping accounts, and preparing tax returns.

A trust is a legal arrangement through which a trustee holds title to property for another person, called a "beneficiary." The person who creates the trust and transfers his property to it is referred to as the "grantor." While there are several different types of trusts, there will always be a grantor, trustee, and beneficiary. Often, these titles can be held by the same individual.

The simplest form of a trust is a revocable living trust in which the person who creates the trust (the grantor) maintains control of the trust while he is alive. In other words, the grantor and trustee initially are the same person. In this situation, the trust document will name a successor trustee to take over after the original trustee dies or becomes incapacitated. Other types of trusts, such as an irrevocable trust or a special needs trust, may have a separate trustee from the start.

The law is not very strict about who may serve as a trustee, as long as the person is legally competent, is over 18 years of age, and is capable of managing his own affairs. The main consideration when selecting a trustee is to choose someone who is trustworthy. The trustee has a duty to manage the trust in the beneficiary's best interest. The trustee does not need legal or financial expertise, but he must have good judgment. In the case of a special needs trust, which is often established for the benefit of a disabled person, the trustee should have knowledge of federal benefits programs.

Another consideration is that the trustee should be able to manage the trust for an extended period of time. An individual's choice of a trustee should be someone who will likely be around for many years and who has the time to devote to trustee duties. It is important that the trustee is of sound mind and body.

If the person creating the trust does not know anyone who meets these qualifications, he can explore the possibility of employing an independent trustee. This can be an individual or institution with no beneficial interest in the trust. Some examples of independent trustees include a bank or trust company, a professional trustee, an investment advisor or manager, an investment banker, an accountant, or a lawyer.

In addition to being independent, a professional trustee will usually have experience and expertise in managing trusts. If one is uncomfortable with having a stranger manage the trust, it may be possible to choose a family member and a professional trustee to serve as co-trustees. The downside to hiring an independent trustee is that the trustee will charge a fee, which is usually a percentage of the trust. Whoever is chosen as trustee, it is important to reevaluate the choice every few years. A person who is appropriate today may not be right tomorrow. An attorney who specializes in the field of trusts and estates can help a client determine who would be the best choice of a trustee.

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates on elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Debby Rosenfeld, Esq. is a senior staff attorney at the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll-free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also the co-founder of JR Wealth Advisors, LLC. The wealth management firm can be reached at 516-466-3300 or 800-353-3775.