How to Choose a Trustee for Your Living Trust

A living trust is a straightforward way to retain control of your assets during your lifetime and make things easier for your loved ones down the road. When you set up a living trust, you typically serve as your own trustee, continuing to manage your own property. If you ever become incapacitated or when you die, the person you pick as your successor trustee steps in to take care of everything for you according to your instructions.

Because your successor trustee plays such a crucial role in carrying out your wishes, choosing the right person or institution for this job is one of the most important decisions in the estate planning process. In this article, we’ll explain what a trustee does, outline the key qualities to look for in a trustee, compare individual and corporate trustees, and address common questions, such as whether a trustee can also be a beneficiary, to help you feel confident about your choice.

What Is a Trustee?

A trustee is the person or company you choose to look after the assets in your trust and manage them according to your wishes. As mentioned above, with a typical living trust to avoid probate, you are both the trust creator (often called the grantor) and the initial trustee. Your next job is to decide who will step in as your successor trustee when you’re no longer able to manage things yourself. As the person who created the trust, you can change your successor trustee at any time, as long as you still have the capacity to do so.

The trustee has a legal responsibility (called a fiduciary duty) to put the trust and its beneficiaries first. This means following the trust’s instructions closely, acting honestly and fairly, and making decisions in line with state law. The next section covers the trustee’s job in more detail.

What Does a Trustee Do?

When most people ask, “What is a trustee?” they want to know about the nuts and bolts of the job. Here’s a closer look at what your successor trustee must actually do during the life of the trust.

Follow your instructions. The trustee must completely understand your trust document. Their job is to make sure your wishes are carried out, including when and how to distribute money or property, how much flexibility they have, and any limits you’ve set.

Treat beneficiaries fairly. A trustee must treat all beneficiaries equally and not play favorites, unless the trust specifically says otherwise. In addition to being part of the trustee’s legal responsibility, it helps to keep the peace.

Take care of trust assets. Your trustee’s first job is to identify and protect the property in the trust, such as real estate, bank accounts, and investments. They’re required to make prudent decisions to protect those assets and, when appropriate, to help them grow.

Handle paperwork and bills. The trustee pays bills and expenses, keeps detailed records, and must stay organized so nothing slips through the cracks.

Deal with taxes and related reports for beneficiaries. Your trustee might be responsible for obtaining a tax identification number for the trust, filing necessary trust income tax returns, and providing beneficiaries with information they need for their own tax filings.

Keep everyone in the loop. A trustee should stay in touch with beneficiaries and answer their questions within reason. Most states have laws that set out a trustee’s duty to keep beneficiaries informed, often requiring regular accountings or financial statements.

Wrap up the trust. With a living trust, your successor trustee takes over if you become incapacitated or upon your death. They’ll settle any debts, pay taxes, and make sure what’s left goes to the beneficiaries you’ve named.

It’s also important to know that a trustee can hire professionals to help with complex aspects of the job, while remaining mindful of the requirement to conserve trust assets. These professionals might include lawyers, accountants, or financial advisers. Even so, the trustee is responsible for making sure the job is done right. Because their duties can last for years and involve significant responsibility, as well as potential personal liability, it’s important to choose someone who is capable and trustworthy.

Factors to Consider When Choosing a Trustee

Choosing the right trustee is about much more than simply picking someone you’re close to or who most “deserves” the position. It helps to consider key qualities when making a well-informed decision about who’s best for the job.

Trustworthiness and Practical Skills

Integrity and reliability are non-negotiable. Your trustee should be someone you trust to follow your instructions faithfully, even when it feels inconvenient. Look for a track record of responsibility, especially in handling money and commitments. While your trustee doesn’t need to be a financial expert, they should feel comfortable working with banks and investment firms, reviewing statements, keeping accurate records, and reaching out to professionals if necessary. If your trust holds complex assets, you might want to prioritize someone with greater financial sophistication.

Time, Judgment, and Communication

Serving as a trustee can be time-consuming, particularly in the months following a death or during family transitions. Make sure your potential trustee has the availability and stamina to handle the job, as some trusts last for many years. Good judgment is also crucial. Trustees often need to balance compassion for beneficiaries with the ability to say “no” when appropriate, and must be able to manage requests without being pressured or swayed by guilt.

Equally important are communication skills. Trustees sometimes need to act as a go-between for beneficiaries with different needs or personalities, so choosing someone who can explain decisions calmly and reduce the risk of disputes is a real asset.

Longevity and Cost Considerations

If your trust is likely to last for many years (for example, if your children are very young or the trust needs to last for the lifetime of a beneficiary) think about the trustee’s ability to serve for the long term. If you think the trust will last for a very long time, you might need to set up a plan for more than one successor trustee, or even consider a corporate trustee (discussed below). Cost could also be a factor, especially for a long-term trust. Family members or friends might serve for little or no fee, while corporate trustees charge professional fees for their expertise and continuity. Sometimes, that expertise is well worth the expense; other times, a simpler arrangement is more appropriate.

Taking the time to weigh these factors can help you decide whether an individual trustee, a corporate trustee, or even a combination of both is the best choice for your situation.

Types of Trustees: Individual vs. Corporate

Once you understand the trustee’s role and what qualities matter, your next step is to choose who will serve. For successor trustees, you can name an individual, a corporate trustee, or both.

Individual Trustee

An individual trustee, such as a spouse, adult child, other relative, or close friend, brings personal knowledge of your family’s needs and can be more flexible and informal in handling trust matters. Often, the cost is lower because family members might serve for little or no fee. However, an individual could lack experience with trust law or taxes and might need to hire professionals, which can add complexity, so you’ll want to carefully consider the particulars of your situation.

In addition, family dynamics can sometimes lead to tension or conflict. If you anticipate challenging relationships among beneficiaries, it’s especially important to choose an individual who can remain neutral, communicate clearly, and manage conflicts calmly and fairly. You’ll also want to consider whether your chosen trustee will be available and able to serve for as long as needed. Naming successor trustees as backups is a good way to plan for the unexpected.

Corporate Trustee

A corporate trustee, such as a bank or trust company, offers professional expertise, objectivity, and continuity. These institutions are equipped to manage complex trusts and provide reliable, long-term administration. The biggest trade-off is cost: Corporate trustees charge fees that could be impractical for smaller trusts. They might also have less personal insight into your family and could be more formal, cautious, or slower to respond. Still, a corporate trustee can be a smart choice for larger or more complex trusts, or when beneficiaries need extra protection or oversight.

Is It a Good Idea to Name Cotrustees?

Cotrustees are two or more people or institutions who share the responsibility of managing a trust. Sometimes this means pairing a family member with a corporate trustee, or having two individuals, such as siblings, serve together.

Advantages of Cotrustees

One big advantage of cotrustees is that you can combine different strengths. For example, a family member might bring personal insight and knowledge of your wishes, while a corporate trustee can offer professional management and investment expertise. Having more than one trustee, whether individual or corporate, can also provide checks and balances, helping prevent mistakes or abuses and possibly reducing the risk of conflict among beneficiaries. If your trust is set up to let one cotrustee continue when another steps down, this arrangement can also provide continuity.

Disadvantages of Cotrustees

Naming cotrustees can introduce complications. Decision-making might become more challenging, so it’s important for your trust to clearly outline whether cotrustees must agree on every action or if one can act alone, and what happens if there’s a disagreement. The administrative burden also increases, since cotrustees need to communicate and coordinate regularly, and institutional trustees might require certain procedures that can slow things down. If you’re considering cotrustees, it’s a good idea to consult a lawyer to make sure your trust spells out how the trustees should work together and how to fill any vacancies, so your plan remains smooth and effective.

Learn More About Making a Living Trust

With thoughtful planning and a clear understanding of a trustee’s role, you can choose the right person or institution to manage your living trust, whether that’s a responsible family member, a professional corporate trustee, or a combination of both. By being realistic about your candidates’ integrity, skills, and availability, and by using clear trust language, you’ll help ensure your wishes are carried out and protect your beneficiaries.

The following articles can help you learn more about living trust:

• Types of Trusts
• Revocable vs. Irrevocable Trusts
• Joint Revocable Living Trusts
• Trust vs. Will: Do You Need Both?

You can find out more about making WillMaker’s living trust in WillMaker’s Legal Manual.