Personal vs. Professional Trustee
When you begin the estate planning process, you are riddled with many different questions that can be challenging to answer. Not only do you need to make difficult decisions on what you want to happen with your plan, you must also decide who will help carry these plans out.
Let’s face it… you are creating these plans for when you are no longer here. You, yourself cannot carry out your plans. You will need to find someone you trust that is both willing and able to put your plan into action.
In this post, I want to talk about choosing the right trustee. I talk about choosing other roles here, here, here, and here.
Before we dive in, let’s explore what a trustee is.
What is a trustee?
Your trustee is tasked with managing all accounts and property that are held within your trust. This could include real estate, bank accounts, retirement accounts, brokerage accounts, vehicles – you name it! If it's listed in the trust, the trustee will be responsible for managing it.
In the state of Illinois, one task that your trustee must complete is to submit yearly accountings. This means they must document all transactions that occurred throughout the year — how much money was present in the trust, how much was earned, and so on.
Your trustee may also be required to use discretion in distributing your assets. I don't want to go into too much detail here, but the main takeaway is that a trustee MUST be able to manage financial accounts and make financial decisions.
How do you choose a trustee?
The good news is, you have options!
You can choose between using someone you know and trust, or hiring a professional. Generally speaking, most of my clients usually have someone in mind when they come to see me. Oftentimes they choose either their adult child, who they feel is very capable of handling money and financial decisions, or they choose one of their own siblings.
Here are two scenarios that might make choosing someone you know more complicated.
Scenario 1
You have two siblings who are equally capable of taking on the role of trustee. They both manage their own finances well and are highly educated, however, they also have their own lives and families. You might not want to add trusteeship to their already-heavy lifestyle, because the reality is, trustee work is WORK. If someone you care about already has a very full life, they may not be able to take on this additional responsibility.
Scenario 2
Sometimes there are decisions that you make within your trust that might seem controversial to those you care about. Choosing someone who is emotionally invested to manage your financial accounts and make discretionary decisions may not be the best choice for keeping harmony within your family. A third-party trustee, who is not involved in your family dynamics, will be able to make financial decisions based on what you have written in the document – and not on emotions or biases.
Pros and Cons
Someone You Know
(Asking a child, spouse, sibling, other relative, close friend, etc)
Pros
They know you and what your wishes are
They know your family dynamics
They know your values
They can infuse their decision making with what they know and understand about you as an individual
It doesn’t (typically) cost you anything
CONS
They may be emotionally involved
Choosing between two people you care about could cause strife between them
There is potential for them to become overburdened by the requirements
Someone You Hire
(Paying a professional: lawyer, accountant, financial advisor, bank)
Pros
They will be able to make neutral, nonemotional decisions regarding your estate
You won’t have to “burden” anyone you care about with such a big responsibility
There is less likelihood of turnover
CONS
Cost — a professional will need to be compensated for their time
A neutral 3rd-party likely does not know you, or your wishes, well enough to make decisions based on what you care about — they only go off of what is written in the trust
Sum it Up
While initially you may not want to hire someone to take on the role of trustee, there certainly are instances where this is the best option. Either decision could be right for you — it really comes down to what your goals are and what the issues are that you anticipate arising in your own personal situation.
I hope you found this helpful! If you would like to read about more topics like this, please subscribe to my newsletter!
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