Cohen & Oalican discuss Choosing a Trustee

CHOOSING A TRUSTEE


Few legal restrictions exist for trustee selection. While some states may limit the ability of individuals or corporations to act as trustee without being licensed or registered by a bank or other appropriate agency, few other restrictions exist. The most obvious choices, along with some of the benefits and disadvantages of each, are listed below (Robert B. Fleming, Choosing a
Trustee, Special Needs Trusts, Stetson College of Law, October 22, 1999):


1. Parents. Parents are good choices from an economic perspective, in that they usually don’t charge a fee, unlike a professional trustee. If the plaintiff is a minor, his parents will know his needs better than anyone else and will be able to plan for his future needs.



But whether particular parents are the best choice depends on a number of factors. While they are very familiar with the daily needs of the beneficiary, they may not be able to view the entire picture objectively. They frequently suffer conflicts of interest given that the decisions they must make as trustee could potentially have a large effect on the household and the
parent/trustee’s decision may be influenced by that knowledge. The parent also may not have the necessary investment experience needed to manage the trust.


2. Other family members. Non parent family members may be appropriate to serve as trustees. They may be better able to manage the business, tax and administrative concerns of the trust. Additionally, the likelihood of self dealing may be reduced. Family members are also economically advantageous, since they will likely charge less than a professional trustee. The reduced costs and security offered by a non parent family member make then an attractive choice as trustee.


3. Family friends. A professional individual, a trusted advisor or a close friend may serve as trustee. A close friend may be willing to serve as trustee for lower fees. Additionally, a close friend may be more accessible in emergency situations and more willing to take on the social worker aspects associated with the trust than would a professional trustee. However, before
agreeing to a family friend, the attorney should do her best to make sure that the friend has sufficient experience and is sufficiently reliable to fill this important role.



Part 2 will discuss some other choices...

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