Gordon and Kelly have agreed to establish a testamentary trust to benefit the surviving spouse and upon the death of the survivor, their children. The principal objective of the trust is not to save on taxes, but to help educate them regarding financial management before they inherit substantial sums outright. What capabilities should Gordon and Kelly consider in choosing the right trustee for their trust?
Since tax savings isn’t a primary focus of the trust, the trustee does not need to have expertise in taxation. However, since Gordon and Kelly anticipate the trustee acting as a role model and teacher for their children, their trustee should have the business skills to act prudently in administering the estate to reasonably preserve the wealth they have accumulated. Furthermore, the trustee should have the communication skills to be able to teach the children these skills.
The trustee they choose should be organized and responsible. Ideally, the trustee should have enough investment and accounting knowledge to perform these tasks. If not, the trustee, at a minimum, should have enough understanding of the tasks to engage and interact with competent professionals who can handle them.
The person Gordon and Kelly choose as trustee should have diplomatic skills and a thick skin. In almost all trustee/beneficiary relationships tensions arise from time to time between what the trustee views as his or her duty and what the beneficiary sees as his or her right.
Gordon and Kelly are fortunate that they have a good friend who is willing to and capable of taking on the job – and it is a job – of trustee. Therefore, they can avoid the new dynamic that is inherently added when one adult family member is managing the finances of another adult family member. Many families do not have that option.
Gordon and Kelly do not anticipate serious tensions or conflicts between their children and the trustee. If they did, they would be wise to consider naming a corporate trustee rather than an individual. In that case, they should interview multiple corporate trustees to determine the way the particular organization handles conflicts, to choose the one best suited to the beneficiaries and the terms of the trust.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives in beautiful Somervell County, near Chalk Mountain.