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Choosing the right trustee as a part of an estate plan

On Behalf of | Dec 22, 2023 | Estate Planning

Okay, you have done all the soul searching advised by your estate planning lawyer, and you have decided to create a trust to convey most of your assets to your children. Now what? The next step is perhaps the most critical: choosing a person or institution to act as trustee.

Although rarely the subject of books or magazine articles, choosing a trustee can be the most critical decision a person makes in devising a suitable estate plan. In this post, we will offer some useful hints for selecting a trustee.

Basic duties of a trustee

In Ohio, a trustee has one singular duty: administer the trust and its assets in good faith. This duty has several aspects: the trustee must act to preserve the trust assets and to distribute them according to the trust maker’s (the “settlor”) wishes.

The trustee has to keep all the trust beneficiaries fully informed as to the status of the trust and its assets. Additionally, the trustee needs to act impartially and equitably among the various beneficiaries.

The powers of the trustee

The exact powers of the trustee should be spelled out in the text of the trust document through the joint efforts of the settlor and the attorney who drafted the document. Nevertheless, the trustee will have significant discretion in managing the trust, and this discretion must be exercised in good faith.

The job of the trustee

The trustee must make many decisions about the trust estate: when, where and how should its funds be invested, and when should the trust itself be distributed to the beneficiaries. These decisions require sophistication regarding stock markets, investment opportunities, and the like.

The trustee must have the capacity to maintain financial records, provide legal advice to the beneficiaries, and maintain trust assets in a manner that can be understood by all of the beneficiaries.

An institutional trustee?

Many settlors choose to select an institutional trustee, such as the trust department in a large bank or an investment advisory firm. Some settlors choose their attorney to act as trustee, but an attorney may soon experience one or more conflicts of interest. For very large estates, many experts would recommend a trustee who is not known by most or any of the beneficiaries.