Although a Last Will and Testament remains the common addition to any estate plan, another very popular estate planning tool is a trust agreement. If you choose to include a trust in your comprehensive estate plan you will need to appoint a Trustee to administer the trust. An Oklahoma City trust attorney at Parman & Easterday offers some suggestions for how to choose the right Trustee for your trust.
Trust Basics
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime.
What Are the Duties and Responsibilities of a Trustee?
In overall terms, the Trustee is responsible for managing the trust assets as well administering the trust using the trust terms created by the Settlor. Among the specific duties and responsibilities of a Trustee are the following:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions, if given discretionary authority
- Keeping detailed trust records
- Preparing trust tax returns and paying trust taxes
What Factors Should I Consider When Choosing a Trustee?
One of the most common – and potentially most serious – mistake people make when they create a trust is to appoint the wrong person as Trustee. To help you avoid making that mistake, consider the following factors when choosing your Trustee:
- Experience, Skills, Education – experience, skills, and/or education in the financial and/or legal field will go a long way toward successfully administering a trust given that the Trustee’s job involves investing trust assets and understanding the laws that apply to trust administration. Selecting someone to serve as Trustee because they are the “oldest child” is the wrong criteria.
- Ability to Respect Your Wishes – will this person insist on injecting his/her opinion into things or can the individual respect your wishes? Will he/she work diligently to fulfill your stated trust purpose, even if he/she doesn’t agree with the purpose? If the answer to either question is “no” then you should reconsider your choice.
- Conflict Free – at the same time, your Trustee should not have any conflicts with the trust beneficiaries. If the Trustee already has a significant personal relationship with a beneficiary, this can often lead to a conflict of interest that can harm the trust because your Trustee should remain neutral.
- Detail Oriented – a Trustee is responsible for keeping detailed records of all trust business so appointing someone who is experienced with keeping similar records is always a plus.
- Conflict Resolution Skills – if your trust includes more than one beneficiary, a conflict among the beneficiaries may arise at some point. Having a Trustee who can resolve that conflict without the need for litigation is an excellent benefit to the trust. Avoid selecting someone who may be a “lightning rod” to beneficiaries.
- Willingness to Serve – by far the most important thing to consider is whether the individual is willing to serve as your Trustee. You are giving your Trustee a JOB! It is surprising how many Settlors appoint Trustees without first discussing the appointment with the Trustee. Always ask your future (hopefully) Trustee if he/she is willing and able to serve in that function before making the appointment official.
Contact an Oklahoma City Trust Attorney
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about choosing your Trustee, contact an experienced Oklahoma City trust attorney at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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