When it comes to planning for the future, there is a decision to be made that is just as important as “who gets what.”
That decision? Who will represent your interests, maximize your assets, and distribute everything according to your wishes. That’s why it’s vital to understand the role of a trustee—whether you already have a trust or are just beginning your estate planning process.
Knowledge is Power
Selecting a trustee isn’t as simple as you might imagine. They need to be qualified, knowledgeable, and committed, and their actions will have a lasting impact. Consider the two options:
Individual Trustee. Some choose a friend or family member, thinking it’s a person they can trust and that it’s an honor to ask them.
Professional Trustee. Many don’t realize that there are trustees that have been professionally trained for this role.
Then, consider the benefits and drawbacks of those choices:
1. Impartiality
An individual trustee may be chosen because they know the family’s history and dynamics. However, it may be more difficult for that person to act objectively, without letting emotions affect their actions. This becomes even more challenging, and a potential conflict of interest, when the individual trustee is also a beneficiary of the trust, meaning they are making distributions to themselves as well as others. A professional trustee serves as a neutral party and avoids any potential favoritism or subjectivity.
2. Expertise
An individual trustee may not have any experience managing a trust overall, or the specific tasks involved (think tax expert, property manager, investment advisor). The knowledge base of a professional trustee who has been in the business for decades, combined with the team of in-house experts, means the professional trustee is prepared to handle all aspects of the trust, from the financial details to the perspective/emotional responses of those involved in creating and/or benefitting from the trust.. They have knowledge in navigating the probate court system. They also utilize a professional trust accounting system
3. Consistent Presence
An individual trustee may be busy with their own lives and families. They may resign, die, move away, or tire of serving as trustee and neglect the trust and its needs. A professional trustee is an entity—it exists exclusively to ensure ongoing, high-level service.
4. Accountability and Protection
A professional trustee is audited. Regulated. Bonded. Insured. A personal trustee offers none of those protections.
5. Communications
A quality professional trustee provides regular communications and detailed statements to keep all beneficiaries informed. An individual trustee may not provide information that is as thorough or as consistent.
6. Costs and Value
Many people presume that a professional trustee will be expensive. Yes, there are costs for a professional trustee, but it’s important to note that individual trustees are also allowed to charge for their time. In addition, while the professional trustee has a team of in-house experts, an individual trustee would need to seek out and hire outside services for tasks they can’t manage. Professional trustees may actually be a more cost-efficient and effective solution.
An Alternative to Consider
If you appreciate the value of the professional trustee’s expertise and continuity but still want a family member to maintain that personal connection, there is an option to name the bank and the family member as co-trustees. This lets the professional trustee handle the bulk of the tasks, lessening the burden on your family, while retaining the family’s insights as decisions are made.
A Note of Caution
While you may encounter “professionals” who say they can be your trustee, in Michigan, if they aren’t a trust bank, they can’t be a professional trustee. They are actually an individual trustee, even though they aren’t a family member. This means they don’t offer the protection of audits, insurance, and more that you receive from a professional trustee.
An Informed Decision
Choosing a trustee ranks high on the list of important decisions to be made–like selecting a medical specialist or choosing an investment advisor. An informed decision will ensure that you have the protection and controls that matter the most to you, bringing you peace of mind.