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The Trustee

Who, What, When & Where

Overview


What Does a Trustee Do?  

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  • Collect assets, pay debts and taxes, keep a record of all transactions (accounting)
    and hire advisors (the real estate agent, attorney, accountant, etc) 

  • Resolve conflicts and claims (i.e. gifts of personal items, trust litigation)

  • Distribute the assets in the estate per the directions in the trust

  • They get paid about 1.5%

  • The Trustee for a Young Beneficiary/Children's Trustee also manages the assets until the person inheriting is old enough to have control (the Young Beneficiary/Children's Trustee decides what to spend money on and what not to)

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How to Pick a Trustee

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  • A good trustee is usually a close relative or professional fiduciary.

  • A good trustee is kind, emotionally intelligent, and detail oriented

  • A US person (live in the US and are citizens or legal residents)

  • Are young and healthy (over 75 is maybe too old)

  • They are willing to do the job and are personally invested in the outcome  (friends often quit when there is a family conflict)

  • Name one person with at least one back-up (co-trustees are not ideal)   

  • They are usually a beneficiary of the trust

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Two Types of Trustees When You Leave Money to Young Children​​

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  • Your Trustee's job is to collect your money and pay your debts and then get the money out of your trust and into the hands of the people inheriting from you.

    • If a young person is inheriting, you pick the age when that person gets control of their inheritance.​

    • For anyone under that age, your trustee does not give the money to the young person, they create a new trust for that person (we call this a Young Beneficiary's Trust) and the Young Beneficiary's Trustee is then in charge of the money until the young person reaches the age you pick
       

  • The Young Beneficiary's Trustee/Your Children's Trustee makes the decisions about how inherited money is spent for the young person on an ongoing basis.​

    • The Young Beneficiary's Trustee/Your Children's Trustee has to provide an annual report of the trust assets and expenses to the Custodial Guardian for your child (if under 18) or to your child (if over 18)​
       

Trustees when you have Young Children

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  • Pick someone who will work well with the child's custodial guardian (consider family conflicts)

  • The trustee and/or Young Beneficiary's Trustee can also be the custodial guardian

  • A professional fiduciary can be a good back-up or a way to avoid family conflicts

  • Your kids can automatically become your trustee when they are adults

 


Professional Fiduciaries

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  • Licensed and insured

  • Most people don’t pick now, you have someone pick in the future; that person can maintain hire/fire powers

  • Solid mid-range option:  it's not as great as your sibling you love and trust completely, but not as bad as a family member who mismanages money

  • Not sure?  Check out our Comparison Chart available online

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1. What Is a Trustee?

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Nobody makes an estate plan just for the joy of paperwork. To make your plan work as you intend, you need real people who can act on your behalf. That’s what a trustee is all about.


Your trustee is the person you pick to take the lead—making sure your trust works as smoothly as possible.


They run your trust, follow your written instructions, and make judgment calls about anything you don’t specifically address in writing. They do not, however, have the power to change who receives what portion of the estate.


Ultimately, you’re giving your trustee great responsibility and authority. That’s why selecting the right  trustee is the most important choice in your estate plan. (Unless you have children under 18. Then picking the custodial guardian for your kids is clearly the most important choice and selecting your trustee/your chidren's trustee is number two.)


Here’s a quick job description.


The Trustee’s Job If You Pass Away

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  • Hire an attorney (they are going to send a bunch of documents for you)

  • Collect the assets (Fill in a bunch of annoying forms)   

  • Pay Taxes and Debts

  • Keep track of what happened (List of the money that came in and out and why)

  • Distribute the Assets (send checks to beneficiaries)  

  • Hours: 1-5  hours per week for 6 months to a year

  • Compensation: Usually 1.5% of the trust assets unless you get sued, then your personal assets may be at risk. 


The Other Trustee Job If You Leave Money to Young People  

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  • Your Trustee's ultimate job is to get the money out of your trust and into the hands of the people inheriting from you.

  • If a young person is inheriting, you pick the age when that person gets control of their inheritance.

  • For anyone under that age, your trustee does not give the money to the young
    person, they create a new trust for that person (we call this a Young Beneficiary's
    Trust) and the Young Beneficiary's Trustee is then in charge of the money until
    the young person reaches the age you pick

  • Most times Your Trustee and the Young Beneficiary's Trustee is the same person,
    but sometimes it makes sense to split up this work.


The Tricky Bits That Make a Trustee’s Job Hard

 

It’s a Sprint, Then a Marathon

 

Trustees’ most common complaint is the time commitment. It’s finding the time to go to meetings, banks, sign documents, make choices, meet with real estate agents, and keep track of up to a hundred individual tasks. In some cases (like when the beneficiaries are small children), the job of the Young Beneficiary's Trustee can last years or even decades. So being a trustee requires patience—especially patience when dealing with bureaucracy.


It’s a Family Drama




The trustee’s job starts at a moment when a whole family is stressed and sad. (Either you’ve just passed away or you’ve become incapacitated. Either way, it’s upsetting for your loved ones.) From there, the trustee starts working hard to fairly distribute the assets. But often, beneficiaries don’t understand why it is taking so long. And then there are disagreements between beneficiaries. For example, one family member may want to buy your house while another thinks it’d sell for more on the market. So your trustee needs real emotional intelligence to see the job through.

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2. How Do You Pick a Trustee?

 

Since being a trustee is a hard job, it’s not uncommon for trustees to quit or decline to serve. So it’s a good idea to choose someone who is personally invested in the outcome of the trust. Someone who’s in good health (physically and mentally) and likely to stay that way for many years to come (so under age 75 if possible).


A good trustee is kind, emotionally intelligent, and detail oriented. They have the time to do the job here in the United States. (So don’t pick someone who is incredibly busy or living out of the country.) They have the ability to work independently, and they are willing to hire help when they need it (usually from lawyers and financial professionals).


A good trustee is one person. It’s technically possible to pick co-trustees, but we’ve found this often creates more problems than solutions.


Long story short: most people choose either a close relative or a professional fiduciary to be their trustee.


Qualities to Look for

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  • Organized

  • Timely

  • Polite

  • Patient

  • Able to prioritize

  • Excellent conflict resolution skills


What Trustees Don’t Need

 

They do not need to be good at finances or law. They just need to be willing and able to hire an attorney, accountant or financial adviser—then follow  their recommendations.


Yellow Flags 

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  • You are picking favorites (they are your best friend, your oldest child, or someone who expects to be appointed—but not someone who would fit the job description)

  • They’re too old or busy to do a good job

  • They have no personal investment in the outcome (they’re not a beneficiary, they’re not related to you or other beneficiaries, they're not a professional fiduciary)... These people usually resign

  • They have no experience managing the amount of money in your estate. (They are a lovely couple from the middle of the country, but they have never seen a million dollars.)

 

Red Flags

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  • Drug, alcohol, or mental health problems

  • Known family conflicts (they do not like the beneficiaries, the beneficiaries do not like them, or they have a high-conflict personality)

  • Too busy to do the job

  • They live in another country or do not have US ID.

 

What Happens If You Pick the Wrong Person?

 

Several things can go wrong if your finances and plans get mishandled, disorganized, or just ignored. When the beneficiaries are young kids, a trustee has to look after the finances for many years before they are ready to take over. If the trustee makes sloppy mistakes or doesn’t keep track of spending—it’s possible for some or even all of the estate to be lost before the kids have a chance to receive it.

 

The most common problem we’ve seen is a trustee who fails to take action at all. They just don’t do the job. And so your beneficiaries have to spend as much as $10,000 and up to 3 years filing paperwork to get the trustee replaced.

 

Choosing the Right Trustee for Your Situation

 

Now that you’ve got the big picture, let’s dial in on things that you may want to keep in mind based on your specific situation.
 

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How to pick a trustee if you have young children

How to pick a trustee if you are a single adult

How to pick a trustee if you have adult children

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3. How to Pick a Trustee If You Have Young Children

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If you have small kids, your estate plan usually centers around two big choices: picking the custodial guardian who would look after your children until they’re 18, and choosing the Young Beneficiary's Trustee/Your Children's Trustee who will run the plan for the finances until your kids are old enough to manage their finances on their own.


It’s ok to pick one person who will be both the custodial guardian and the children's trustee, but this can be a lot to ask of someone. It takes one set of skills to take on the sacred duty of raising your children. And it takes another set of skills to manage large amounts of money for a long period of time. (Common situation: home value + life insurance + retirement accounts = $3-5 million.)


Our clients’ most common choice is to have a close family member, usually a sibling, serve as both the custodial guardian and the children's trustee. Often clients name a professional fiduciary as a backup trustee in case the sibling can’t do the job at any point in the future for whatever reason.


If you do pick two people to take on these two roles, keep in mind that they will need to be able to get along and work together for many years. That’s why we usually don’t recommend choosing two different family members to do these jobs unless they have a truly amazing relationship filled with joy and trust and bills.


So if you don’t think your custodial guardian is a good fit for the financial responsibilities of being your children's trustee, we recommend selecting a professional fiduciary for the financial work instead. An experienced (and insured) pro can make a world of difference in handling complicated financial issues over the long term. You can name family members to have hire/fire powers in case the professional fiduciary ends up not being a great fit.


In fact, Sarah and Kelly (our managing attorneys at Summerall Law) both decided professional fiduciaries as back-ups were the right pick for their personal estate plans.

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How to Pick a Guardian

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4. How to Pick a Trustee If You Are a Single Adult
 

If you’re a single adult, one primary concern is making sure you’re looked after if you become incapacitated. This is especially true for some of our older clients who are often focused on ensuring their care and finances are managed properly. 

 

The most common way our clients address this is by naming a sibling or friend as their trustee, and then naming a professional fiduciary as a backup.

 

Your sibling or friend may know you best, but they are aging too. And the job of trustee may be quite a burden for someone who’s health and capacity may be faltering in the years ahead. Having a fiduciary on hand as backup ensures you’ll have someone ready and able to manage your care and finances when you need help.

 

It’s also common for clients to name an adult niece or nephew as their trustee. This sorts out the concerns about an aging trustee. But it can have its own problems if your niece or nephew doesn’t have the ability to drop everything and come take care of you when you need the help. Unfortunately, a lot of these trustees end up quitting for that reason. So it’s especially important to name a fiduciary as a backup if you’re going to go with this option.

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5. How to Pick a Trustee If You Have Adult Children

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For most clients they will select their adult children to serve as trustees in the order of age.  This is the best solution for most clients.  

 

We do caution our clients to try not to feel obligated to name children in order of age, and only name children who are really a good fit for the job of trustee - they are able and willing to do the job and they will not create family drama.   We have had a lot of experience with clients naming problematic children as back-up trustees or co-trustees because they did not want the child to feel bad.  Since it is fairly common for the first trustee to not be able to serve, the problematic child can end up serving and cause a number of issues. Picking a child who is not local is a feasible option in the modern world.

 

Many clients want to name co-trustees or split the job of trustee, power of attorney, and health care agent, in order to avoid hurt feelings within the family.  This often ends up being a burden on the person who is actually doing all the work. If one of your kids is going to be the person who takes care of you and the other one is unlikely to be involved, do the first kid a favor, and leave the other child out of key roles and decision making.

 

If you have a child who is living in your home, taking care of you and managing your bills, please be clear with them and in your trust on what happens when you pass away.   Often, these children/trustees feel entitled to stay in the home after the passing of the parent.   If that is what you want, it needs to say that in your trust, otherwise, it is their duty to move out of the house.   If you want to pay them for their time and effort in caretaking, state it in your trust.   The reverse is true as well - some clients feel that if a family member is taking care of them they are not entitled to additional compensation.  It can be helpful to state that in your trust.    

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6. What is a Professional Fiduciary Trustee
 

Choosing your trustee is one of the biggest decisions in estate planning. And often, it isn’t easy to think of a close family member who has what it takes to do the job right. That’s perfectly ok. It happens all the time. There’s a world of talented, experienced professionals who can step in and help your plan go as smoothly as possible. These people are professional fiduciaries.

 

Who Are They?

 

A professional fiduciary is a lawyer or banker who has passed the test, has an active license, and carries special insurance—all to make sure they are ready and able to serve as a trustee. Usually, their entire practice is dedicated to acting on behalf of estates. This is what they do. 

 

Why Would I Want One?

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This isn’t their first rodeo. A professional fiduciary knows how to navigate some of the roughest bits of serving as a trustee. So the risk of a costly mistake is much lower. And the speed of the process is often quite a bit quicker. Plus, no family drama.

 

Pros:   

  • Fewer family feuds (no arguments at future Thanksgiving dinners)  

  • Faster (this is their full-time job)  

  • Less likely to make expensive mistakes (like not carrying insurance on the home or letting a stock rapidly decline)

  • Insurance

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Cons:   

  • Personal decisions are being made outside the family

  • If there is litigation, it will probably be more expensive than suing a family member

 

How Much Do They Cost?

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$100-$300 per hour.  Keep in mind that all trustees get paid, even if they’re a family member. This hourly fee may be more or less than what a family trustee would charge (typically a small percentage of the estate).

 

How Does It Work?


At Summerall Law, we make it easy to go with a pro if that’s what you want. It’s a 3-step process.

  1.  We make your trust say you want a professional fiduciary.

  2.  You decide if you want to be the one to pick the pro or if you want your friends and family to pick the pro later when one is needed, potentially decades from now.

  3.  The person who picks the trustee can retain powers to fire them if it is not working out.


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7. Estate Plan Trustee: Use Family or Go with a Pro?

Here is a basic outline of the pros and cons of using a family member versus a professional fiduciary.

Professional

Family Member

Getting the Job done

Very likely job will be completed in a reasonable period of time

Very likely they will struggle with this task for years

Conflict in the Family

Fewer family feuds, if they hate someone, they hate someone not related to them

Might have more insight into the family dynamics, you know them personally and how they would likely resolve a situation

Cost

Hourly fees, will bill for all time the spend

Will probably take % -
Attorney fees might be higher, because they need more guidance or make mistakes, will cost more if there is litigation

Stealing from the Estate or Loss

I have not seen it happen. 
IF it were to happen, they do have insurance to cover losses and theft.

I don’t see a lot of stealing; I see a lot of wasting of assets and costly poor/unfair decision making.

Insurance

Always have

Almost never have

Personal Decisions

Will probably used business standard conflict management techniques, likely to be resolved faster

More likely to do what they think is right (rather than fair under the law), it will likely take longer to resolve

Attorney Relationship

They likely have attorneys they know and like

Will need to work with an attorney, may spend a lot on fees having the process explained, however, some work alone or with minimal attorney oversight

Caring for You in Old Age

Unlikely to allow elder abuse to occur, will likely cost more, usually plugged into quality home health care providers, not a burden on your family

Elder abuse is more common (financial and not receiving proper medical care), the trustee is likely to be overwhelmed and overstretched, it is very hard on the family.

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8. How to Pick a Custodial Guardian
 

The Custodial Guardian
 

A custodial guardian, the person in charge of the day-to-day care of any children under the age of 18, ideally is:

  • Willing to do the job

  • Healthy and young enough to stay with the kids until they are 18

  • They don’t have to be local

  • They can also be your trustee and the children's trustee


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How to Pick a Custodial Guardian

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When you’re a parent of kids under 18, estate planning is about much more than money. It’s about ensuring your children are well taken care of no matter what happens to you and your partner.

 

That’s what the custodial guardian is all about. If you pass away or become incapacitated, the custodial guardian is the person you choose to take on the sacred responsibility of raising your kids until they are 18. This person is in charge of housing, feeding, clothing, schooling, and making decisions about medical care for your kids.

 

It’s everything but the money. You can pick a different person (if you want) to be the financial guardian/children's trustee, managing money for your kids until they’re old enough and mature enough to take on that responsibility themselves.

For more info, please see our full discussion of this topic on our How to Pick a Custodial Guardian page.

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