When you create a trust, you must appoint a Trustee to manage and administer that trust. The Trustee has a legal duty to manage the trust’s assets and carry out the Grantor’s instructions as written in the trust terms for the benefit of the beneficiaries. Ultimately, the success or failure of your trust often depends on the person you appoint as Trustee. While many people choose a friend or family member to serve as Trustee, appointing a professional Trustee is often a better choice. To help ensure the success of your trust, a Los Angeles trust attorney at Schomer Estate & Wealth Advisors explains why appointing a professional Trustee is often the best choice.
How Does a Trust Work?
A trust is a legal arrangement by you (the Grantor) transfer assets to a Trustee, who then holds and manages those assets for the benefit of your beneficiaries named in the trust agreement. Trusts are highly versatile and can be used for various purposes, including asset protection, protecting the inheritance of a minor child, and charitable giving. The Trustee is responsible for managing the trust’s assets, making distributions to beneficiaries, filing taxes, and ensuring that the trust operates according to the terms you established.
The Drawbacks of Appointing a Friend or Family Member as Trustee
While it may seem convenient or comforting to appoint a friend or family member as your Trustee, there are drawbacks to choosing this option. The role of Trustee can be time-consuming and demanding and a friend or family member may not have the time to devote to the job. A friend or family member may also lack the experience or knowledge needed to manage the trust effectively, leading to mistakes that result in financial losses, tax penalties, or even legal disputes. Serving as a Trustee can also strain personal relationships. If your beneficiaries are unhappy with the Trustee’s decisions, for example, it can lead to conflicts that damage or even destroy relationships. Meanwhile your appointed Trustee may feel overwhelmed by the responsibility of administering the trust while also feeling guilty about charging a fee for their services despite being entitled to compensation. Finally, appointing a friend or family member as Trustee can create conflicts of interest. For example, if the Trustee is also a beneficiary of the trust, they may be tempted to make decisions that benefit themselves at the expense of other beneficiaries.
The Benefits of Using a Professional Trustee
One of the most compelling reasons to appoint a professional Trustee, such as a bank, law firm, or trust company, is the expertise they bring to the role. Managing a trust can be complex, requiring a thorough understanding of the relevant laws, financial concepts, and fiduciary duties. A professional Trustee should have the necessary experience and knowledge to handle these responsibilities competently. This expertise can help ensure that your trust is managed efficiently, that your assets are preserved and grown according to your wishes, and that your beneficiaries are taken care of in the way you intended.
Another significant advantage of using a professional Trustee is objectivity. Unlike a friend or family member, a professional Trustee has no personal stake in the trust. This neutrality can be particularly valuable if there is a potential for conflict among your beneficiaries. A professional Trustee can make decisions based solely on the terms of the trust and the best interests of the beneficiaries, without being influenced by personal relationships or emotions.
Professional Trustees also offer much-needed continuity. Although friends and family members may be willing to serve as Trustee, their ability to do so over the long term can be uncertain due to personal circumstances, health, or other commitments. A professional Trustee, on the other hand, can provide consistent management of the trust throughout its duration. This continuity is particularly important for long-term trusts, such as those intended to provide for minor children, disabled individuals, or future generations.
Do You Have Additional Questions about Appointing a Professional Trustee?
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about appointing a professional Trustee, contact the experienced Los Angeles trust attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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