An important consideration for a person establishing a trust (known as the “settlor” or “grantor”) is who should be the trustee? Whether the trust is created for tax planning, asset protection or financial management, the choice of a trustee is an important decision.
The settlor first needs to have a good understanding of the trustee’s many responsibilities, in order to make an informed choice. The primary responsibilities of a trustee include the following:
- Managing the trust assets;
- Investing the trust assets;
- Determining and carrying out the settlor’s intent regarding investment preferences;
- Determining and carrying out the settlor’s intent regarding beneficiary distributions;
- Determining the scope of the trustee’s discretion to manage, invest and distribute trust assets;
- Recordkeeping, including the filing of tax returns and probate court accountings.
In addition to considering the trustee’s responsibilities, the settlor should also take into account the nature and extent of the trust assets. If the trust assets are primarily cash, stocks and bonds, has the trustee had experience with these types of investments? If the trust assets are commercial real estate or a closely held business, has the trustee had experience in handling these more complex types of assets? A trust may authorize the trustee to hire professional advisors, including investment advisors, accountants and attorneys; however, it is still helpful if the trustee has had some experience with the types of assets to be managed in the trust.