Many high-net-worth people rely on trusts to minimize taxes and keep wealth in the family. But who should serve as trustee? A survey by Spectrem Group shows many wealthy investors who create trusts designate themselves or a family member as the trustee. But are family members the best choice?
Trustees have many complex responsibilities. The primary obligation is to distribute assets and trust income according to the wishes of the grantor - the person who establishes the trust. But the job also involves keeping records, investing assets, filing tax returns, and resolving conflicts.
Among affluent investors, Spectrem reports, 41% serve as their own trustee, 40% name their spouse, 21% name another family member, and 18% name their child. Just 25% name a financial institution, while 24% name their attorney and 13% appoint their accountant. (The numbers add up to more than 100% because some grantors name more than one trustee, known as co-trustees.)
However, trust experts say family members often have problems trying to administer a trust. They may not understand legal and regulatory issues, and sometimes may grant distribution requests too freely, draining the assets.
An outside professional can provide the expertise needed, along with an objective viewpoint. Sometimes the best solution is to appoint a family member along with a trust expert as co-trustees. The professional ensures the trust is properly handled, while the family member may be in a better position to deal with family issues.
Here are four reasons to consider appointing a trust professional as trustee or co-trustee:
A corporate trustee brings objectivity and ensures that any conflicts or questions are resolved in a legally appropriate manner. In conclusion: There are numerous options at your disposal, so obtain expert advice.
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