When you think about your legacy, you may envision the people you love, the wealth you’ve built over your lifetime, and your long-term impact on successive generations. Also important is the person (or institution)—the trustee—that you select to carry out your vision (for individuals who create trusts to handle some or all of their assets after their passing).

There’s more to this aspect of legacy design than people might anticipate. Below, we’ll outline a trustee’s primary responsibilities, as well as factors to weigh as you make this crucial decision.

Broadly speaking, a trustee is tasked with carrying out the grantor’s wishes and directions, as stated in the underlying trust documents. These responsibilities typically encompass three main areas:

  1. Administering the trust
  2. Overseeing the trust’s investments
  3. Managing distributions from the trust

All of these activities require considerable focus and time. For complex trusts, the role of trustee can be akin to a full-time job, particularly in the first six to 12 months of a trust’s administration.

As a result, the decision requires more deliberation than simply conferring special recognition on a treasured friend or trusted family member.

“I often counsel people, ‘Don’t simply be guided by someone’s intellect,’ says Felicia Chang, Westmount’s Director of Wealth Strategy. “Of course, you want to select a trustee whom you esteem and trust to carry out your wishes. But there are a host of practical considerations, as well.”

Those considerations include:

  • The nature of your assets. Whether your balance sheet consists of an operating business, commercial or residential real estate, or securities, it would be prudent to select a trustee who has familiarity and substantive knowledge of those types of assets.
  • Availability. You might be tempted to select a sibling or trusted friend as trustee. But if that person has a demanding career or family commitments, or lives far away, you might be saddling that person with a sizable burden.
  • People skills. Your trustee will be tasked with making complex decisions and serving as the representative of your wishes as stated in the trust. A trustee needs to be empathetic, diplomatic, and disciplined, with the fortitude to uphold the provisions of the trust.
  • Family dynamics. Remember, the trustee will be the person making the distribution decisions, e.g., how much and when a beneficiary receives funds from the trust. If you name a family member as trustee, consider the resulting power dynamics of that family relationship.

With that said, if you don’t wish to burden a friend or family member, there are other options available.

For example, you might consider your CPA or attorney—someone who knows you well and who may  already have a relationship with your beneficiaries.

Alternatively, you could engage a private fiduciary—an individual who provides a fee-based service as a professional trustee. Or, you could look to a corporate trustee—typically, a bank or financial institution with a trust department.

Once you’ve made this decision, Felicia recommends periodically reviewing your trust documents to ensure that the named trustees are still the appropriate person(s) to carry out your wishes and directions.

“As we know, relationships change, and people move or pass away. Ideally, you would name a trustee with significant integrity and experience, but with projected longevity to outlive you,” she says.

There are other aspects to consider as well. For example, professional and corporate fiduciaries will usually have a published fee schedule, typically based on the value of the trust’s assets, whereas individual trustees charge a broader range of fees. Trustees, too, may be subject to certain legal risks and liabilities if they fail to carry out their duties.

As Director of Wealth Strategy, Felicia has advised many ultra-high-net-worth families about this pivotal decision. Her insights and ideas are explored further in our latest Q&A, which you can download here.

If you have other questions about choosing a trustee, contact your Westmount advisor at 310-556-2502 or email info@westmount.com.

Disclosures

This report was prepared by Westmount Asset Management, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission. The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent.

If you have any comments or questions about this article, please contact us at info@westmount.com.