SOURCE: Investment Advisor, May 2007 Issue
People often name a friend or relative as a trustee based on that person being “the responsible one.” The friend or family member may even feel honored in being named to serve in this role. It sounds like a perfect arrangement, doesn’t it? But is it? All too often, the answer is “No, it is not appropriate.” Most people have no idea what it really means to be a trustee and how much work it entails. The responsibilities involved are often complex and time-consuming. It may even prove to be overwhelming for those who lack the time, experience, and specialized knowledge required to administer the role properly.
Before naming a trustee, you should be educated on what a trustee is and who is appropriate to assume the role.
What is a trustee? A trustee is a person (or institution) to whom legal title to property is entrusted in order to administer it for a beneficiary.
Who is appropriate to assume the role? When determining a trustee’s overall responsibilities and figuring out who should be a trustee, considerations should go beyond the duties and take into account the relationships among family members.
To do that, ask yourself these five questions:
1. Do you trust this person to be true to your interests? Will this person put your interests ahead of his/her own?
2. Are you focusing more on yourself in the selection process or the potential trustee? Although the choice may feel right to you, is it equally acceptable to the trustee?
3. Will naming this person cause family tension or a rift?
4. How is the health of the chosen trustee?
5. Does it make sense - financially and otherwise - to name an outside professional as a trustee?
Keep in mind, a trustee may need to wear many hats — art dealer, bill collector, investment analyst, bookkeeper, property manager, business executive, tax specialist, secretary, and financial counselor. Depending upon your estate, this could be a full-time job!