While it is true that every estate plan should be uniquely tailored to the needs and goals of the plan’s creator, here are some common estate planning tools and strategies found in the average plan. A trust, for example, is an estate planning tool you will likely find in most plans. If you are considering the addition of a trust to your estate plan, one of the most important steps in creating that trust will be appointing a Trustee. A Minot living trust attorney offers guidance to help you choose the right Trustee for your living trust.
What Is a Trust?
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts.
What Are the Duties and Responsibilities of a Trustee?
The Settlor (creator) of a trust appoints the Trustee. In overall terms, the Trustee is responsible for managing the trust assets as well as 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 and paying trust taxes
Choosing Your Trustee
One of the most common mistakes Settlors make when creating a trust is to use the wrong criteria when appointing someone as the Trustee. For example, people often appoint a spouse based solely on the fact that they believe their spouse will have their best interests in mind or they appoint a family member because they trust them. While those are both desirable characteristics, they are not characteristics that can help someone successfully administer a trust. If you are at the point where you are considering someone for your Trustee, ask yourself the following questions to try and evaluate if that person really has the characteristics that are necessary to successfully administer your trust:
- Is the individual educated and/or experienced in the finance and/or legal field? Many of the tasks of a Trustee involve understanding complex legal and/or financial concepts so it certainly helps to appoint a Trustee with a legal and/or financial background.
- Is there a potential for conflicts if this individual is the Trustee? If the individual has a pre-existing relationship with trust beneficiaries, putting him/her in a position of control over assets meant for them could create an uncomfortable situation at best, or a conflict at worst.
- Will he/she be good at conflict resolution? It is not uncommon for conflicts to occur among the beneficiaries of a trust. A Trustee who is skilled at conflict resolution can go a long way toward avoiding costly litigation.
- Are you certain the individual will honor your trust purpose? The Trustee is legally bound by the terms of the trust, as you wrote them, unless a term is unconscionable, impossible, or illegal. Sometimes, however, a Trustee is required to use discretion or interpret a term. In that case, the trust purpose should be considered and honored, whether the Trustee agrees with the purpose or not. Make sure a potential Trustee can do that.
- Have you discussed the position and is he/she willing and able to serve as Trustee? Settlers frequently fail to discuss the appointment with their intended Trustee, instead simply assuming the person is willing to serve as Trustee. When it comes time to administer the trust, the individual does not have the time, has moved away, or has personal/medical issues that prevent the fulfillment of the duties of a Trustee – or simply doesn’t want to serve.
Contact a Minot Living Trust Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about appointing a Trustee for your living trust, contact a living trust attorney at German Law by calling 701-738-0060 to schedule an appointment.