We often discuss trusts on this blog. In a recent post, we discussed the question of whether you could use more than one trustee. Another key question that deserves its own post: How do I choose a trustee for a trust?
The family option
When setting up a trust, there are a lot of considerations, and one of the final considerations is the trustee. If you have a lawyer or financial professional in the family, they may be your first option. However, unless they have professional experience as a trustee, they likely are not a good choice. A trustee’s responsibilities are a highly technical job that could last for decades with potential liability lasting that time as well. This is why a family member is rarely the best choice for a trustee.
Now that you have decided to hire an attorney, financial professional or a specialized entity as your trustee, the first consideration is cost. Be sure to get total costs as a single (non-entity) trust may need to hire other professionals, which have their own fees. They may have the experience needed to not hire other professionals, but you need to ask and get the full fee. This may also be true with entities as well, so get the comprehensive fee, not just the trustee fee.
Ability and experience
Next, get the background and resume for the Florida individuals and entities you research. You need to ensure that they have the experience and skills needed to actually do the job. Ask about substance abuse as well. Remember, they are going to be a fiduciary. Ask the uncomfortable questions and follow-up questions. Another consideration is the trustee’s ability to make impartial decisions, which means it is normally, a good idea to hire a trustee that does not personally know the family.
Documentation and reports
The trustee is responsible for tax filings, issuing account statements and keeping trust records, including activity reports. Both the IRS and each state has specific laws about recording keeping and documentation. Ensure prospects have this knowledge.
The trustee can be held personally liable for their conduct, even if made in good faith. Poor investment decisions and conflicts of interest can also cause litigation. This is why there must be sufficient liability insurance and protection to back up meticulous accounting, documentation and reporting requirements.