There are many types of trusts used and customized to achieve a wide range of personal, tax, financial and estate-planning objectives. Your choice of trustee is a critically important decision you will make and, naturally, there should be careful consideration of your selection. Your trustee will be responsible for a wide range of duties, many of which are complex and technical—and require his or her time and careful attention to detail.
Responsibilities are likely to include:
- Managing accounting functions such as quarterly reporting, allocating receipts and expenses, tax returns and segregation of income and principal
- Disbursing payments to beneficiaries
- Collecting income
- Overseeing investments and working with investment managers
- Maintaining a fiduciary commitment to act solely in the best interests of the trust
Many people choose family members for the trustee role. That seems logical since a family member probably knows you well and understands your wishes.
However, the demands of administering a trust can become cumbersome and time-consuming, and there can be significant risks—sometimes including considerable financial liabilities.
Moreover, the trustee can hold these responsibilities for an entire generation or more. When the trustee is also a family member, dealing with special requests and family dynamics can place the trustee in an awkward position. Willingness to serve over a long time, honesty, integrity and loyalty of the trustee are critical considerations.
You may be better served, then, by having a professional (such as an attorney, accountant or investment advisor) or corporate trustee shoulder these responsibilities. A corporate trustee is a firm that specializes in overseeing trusts. Trust officers or specialists at the firm are required to know the rules related to trusts and trust investments. As fiduciaries, they are required by law to conduct the trust according to your instructions and to ensure that assets are managed in the best interests of trust beneficiaries.
You yourself may serve as co-trustee or name one or more others as co-trustees. In these cases, the corporate trustee not only provides deep expertise, but also helps to preserve continuity of trust management if a co-trustee becomes incapacitated or dies. In addition, a corporate trustee is prepared to manage trust assets through multiple generations.
The cost for trustee services is also a consideration. Corporate trustees typically have various fees for their services, and with larger trusts even family or friend trustees are often compensated to encourage prompt performance and avoid resentment about duties.
Whatever you ultimately decide on for trustee selection, be sure you make the decision with careful consideration, and of course, after prior discussion with and acceptance by the people involved.
Marie A. Moore is a Financial Advisor with the Wealth Management division of Morgan Stanley in Dallas, Texas. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC. Member, SIPC. www.sipc.org. Morgan Stanley Financial Advisor(s) engage Worth to feature this profile. Marie A. Moore may only transact business in states where she is registered or excluded or exempted from registration, www.morganstanleyfa.com/themooregroup.
Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Marie A. Moore is not registered or excluded or exempt from registration. The strategies and/or investments referenced may not be suitable for all investors. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters. Morgan Stanley Smith Barney LLC does not accept appointments nor will it act as a trustee but it will provide access to trust services through an appropriate third-party corporate trustee. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the US. CRC1407376 02/16.
This article was originally published in the April/May 2016 issue of Worth.