Important Considerations When Choosing a Trustee in Virginia

Once you have decided that a trust is the best estate planning vehicle for you and your family, you must choose the best successor trustee for your trust. Typically, you and/or your spouse will act as the initial trustee(s) of your trust, and you will designate a successor trustee who will step in and manage the trust when you and/or your spouse pass away or become incapacitated.

When choosing a successor trustee, there are essentially three options:

1. A family member;
2. A close advisor, such as a lawyer or accountant;
3. A corporate trustee or institution, such as a bank or trust company.

You will, of course, want to choose someone who is trustworthy. However, your trustee must possess other important qualities as well.

To understand what qualities are needed to be a trustee, it is a good idea to review the complex duties that a trustee must shoulder. Here are the key responsibilities of a trustee:

• Study the terms of the trust and review the trust agreement;
• Transfer and inventory assets;
• Determine adequacy of property insurance;
• Undertake record-keeping responsibilities;
• Record details of all investment income and principal, receivables, and disbursements;
• Act as an investment manager;
• Carry out duties to beneficiaries;
• Attend to tax issues; and
• Facilitate distributions to the trust beneficiaries.

As you can see, this is a long list of duties for one or even two individuals to carry out effectively. Any individual who you might have in mind to fulfill these duties as your successor trustee will undoubtedly have their hands full.

Choosing a Family Member or Close Advisor

In many instances, choosing a family member as a successor trustee would be a natural fit. Normally, we give family members first crack at the job, because the role is typically compensated with a fiduciary fee, and we think it makes sense to keep the money in the family where possible.. However, some trusts, such as a special needs trust established to support a disabled beneficiary, can be very complex to administer. Not all families have members with the experience, capability, or availability to administer such a trust.

Furthermore, given the personal dynamics in some families, choosing a family member could be disastrous. We typically build in escape clauses (“escape” in the colloquial sense) for the Trustee and/or for beneficiaries. There are several ways to do this, so if you have a close call situation, be sure to raise the issue with your attorney. Good estate planning can head off trouble at the pass, but only if you alert your attorney to the issue ahead of time.

An alternative to selecting a family member would be to select a close advisor, such as an attorney or accountant, who will typically have a personal relationship with you and your family and first-hand knowledge of your desires. They are still a third party to the family drama, too, so that can be appealing to some clients. However, beneficiaries often view the third party advisor with suspicion, so it is wise to ensure your advisor has a good rapport with your family before appointing them. You might even have everyone over for coffee to meet each other.

One caveat to choosing a family member or close advisor as your successor trustee is that there is the risk that the person you select may pass away before you do. A way to mitigate that risk isb y choosing a corporate trustee or institution, because it is vastly more likely that they will be extant to serve as your trustee after your death.

Choosing a Corporate Trustee or Institution

Corporate trustees and institutions provide the benefit of experience in money management and trust administration. Corporate trustees and institutions make impartial decisions relating to distributions and are able to say no when it is appropriate to say no, without the involvement of emotions.

Also, corporate trustees and institutions have been granted permission by the state to act in a fiduciary capacity, which means they are subject to a wide range of audit control and government regulatory supervision. In addition, corporate trustees and institutions typically possess the capital and financial resources to stand behind their actions and decisions as fiduciaries.

Some corporate trustees and institutions will permit the appointment of an individual as a co-trustee. But, the downside to this is that having co-trustees increases the likelihood of disagreements arising between them.

Contact an Experienced Virginia Estate Planning Lawyer

One of the biggest decisions you need to make concerning your trust is who will serve as your successor trustee. To learn more about choosing an appropriate successor trustee for your living trust or if you are involved in administering a trust, please feel free to contact us at (703) 553-2577 or use the contact form for a consultation with an experienced Virginia estate planning lawyer.

The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.