When You Should Designate an Individual as the Trustee of a Trust You Create

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When you establish a trust, you will be required to designate a trustee. In this post, we will address when designating an individual as trustee - instead of designating a corporate trustee.

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For many trusts, it is appropriate to designate an individual trust as the trustee instead of naming a corporate trustee. A few examples of where it is appropriate to designate an individual trustee are as follows:

(1) You want to leave $25,000 to your grandchild, in trust, so that the grandchild can go to school and perhaps get a head start on life. This is not enough money to justify the expenses of a corporate trustee.

(2) You want to keep your farm or other land that has sentimental value to you "in the family" for another generation or two. You will likely leave the property in a trust so that one rogue descendant cannot mess it up for everyone else by demanding a sale of the property or farm. A corporate trustee likely does not want to manage your sentimental family property.

(3) You designate one or more of your kids as the Successor Trustee of Co-Trustees of your revocable living trust so that they can sell your home and distribute your investments and other financial assets to your trust beneficiaries after you die. This "trustee position" is a temporary position and it may be best to designate an individual or individuals to fill this role.

(4) You transfer assets to a particular type of trust so that you are protecting them in the event you go into a nursing home in the future. Probably not enough assets here to justify a corporate trustee to serve as trustee.

However, people who are giving or leaving a significant sum of money or investments, in trust, to be handled by a trustee for many years, will likely consider whether they should name a corporation (that is qualified to be a trustee) or an individual. as the trustee.

For example. Uncle Ulysses wants to leave hundreds of thousands of dollars (or perhaps millions) in trust for his kids and/or grandkids. He has never in his lifetime had any dealings with a corporate trustee, but her fears that corporate trustee fees will eat up most of the trust assets. Uncle Ulysses has a good relationship with Niece Nancy. After all, Niece Nancy is an accountant. So, due to Ulysses' fear of corporate trustees, and also due to his excellent relationship with Niece Nancy, Ulysses selects Nancy to serve as the trustee of trust Ulysses sets up for his descendants. In addition, Ulysses knows that Nancy best understands the needs of Ulysses' kids and grandkids, and Niece Nancy would make better distribution decisions than "some old banker" who does not know Ulysses' family. After all, Ulysses thinks, Niece Nancy can hire help if she needs it in the future.

You have many options when establishing a trust for others. In your trustee designation provisions of your trust, especially one that will last for many years, you should designate initial trustees, successor trustees, and a method for appointing a trustee in the event of a vacancy in the office of trustee.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450

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