Creating a trust as part of your estate plan can bring significant benefits to you and your family members, but it’s vital that you carefully consider who will manage it. Trusts require reliable management and administration, something not everyone can handle well.
In this article, a Massachusetts estate planning attorney from Cohen Cleary, P.C. explores how to choose the right trustee for your trust in Massachusetts, including key qualities to look for and common mistakes to avoid.
Why Choosing the Right Trustee Matters
To choose a reliable trustee, you must realistically evaluate whether a family member can take on this task, since it requires specific skills and character traits. When your choice administers the trust, they may deal with numerous trust issues, including:
- Communication concerns: Trustees must stay in regular contact with beneficiaries, attorneys, and other parties to properly administer the trust.
- Litigation and other legal disputes: Beneficiaries may contest the will or trust documents.
- Breach of fiduciary duty: Your trustee owes a legal fiduciary duty to act in the best interests of the beneficiaries.
Choose someone who knows your values, is dependable, and can put their responsibilities above their own interests.
The Role and Responsibilities of a Trustee
Creating the trust with you as the grantor or settlor means you must choose a trustee (or trustees) to manage the assets according to the terms you outline in the trust. They must recognize their duties and requirements, and have resources they can rely on for questions or problems. Your trustee will be responsible for managing these duties:
- Following the terms of the trust with the fiduciary interest of the beneficiaries, and adhering to your moral values
- Collecting deeds, titles, and other documents for trust assets
- Preparing a full inventory of assets, liabilities, and beneficiaries
- Maintaining detailed sales, acquisition, and distribution records
- Paying bills, taxes, and asset maintenance costs
- Managing creditor claims
- Administering beneficiary distributions
Trustees should regularly consult with attorneys, accountants, and investment professionals to guide their decisions.
What Qualities Should You Look for in a Trustee?
To take on the demands of trust administration, a good trustee should embody as many of the following qualities as possible:
- Financially knowledgeable
- Organized
- Neutral or able to put the trust’s interests before their own
- Willing to accept the role
Trustees must understand the seriousness of their role and commit to upholding their fiduciary duty. They should also recognize when they lack the necessary skills and seek out professionals for assistance.
Trustee Options in Massachusetts
Commonwealth laws allow you to select family members or friends as trustees, although you can choose someone outside your circle. A professional or corporate trustee may be a reasonable choice if you have few family members or there are significant rifts between them.
Family Member or Friend
If the person you choose is a family member or friend, choose a successor trustee in case your first choice can’t accept the role. They may resign, refuse it at the time they’re needed, or even pass away before you do.
Professional Individual Trustees
You can choose a lawyer or other professional as a trustee. They can bring financial, tax, and asset management skills your family members may lack. You’ll need to include provisions in the trust terms to pay a professional trustee for their services for the duration of the trust’s life.
Corporate Trustees
A final choice is electing a corporate entity as your trustee, such as a bank trust department or other corporate trust entity. A corporate trustee can manage transactions, taxes, and distributions and perform as a prudent investor with no beneficiary interest. A downside is that the company has no emotional connection with your values.
How to Evaluate Potential Trustees
Trustee candidates should understand what’s important to you and support those goals after your death. They should dedicate themselves to the work, make wise financial decisions, and remain impartial when distributing to beneficiaries of the trust. A trustee should remain accountable to the trust’s terms, handling tax returns, transactions, and assets for the trust’s best interests.
Your trustee should have some experience managing financial matters and communicating complex considerations to the beneficiaries. If you don’t have a family member or friend who can meet these standards, investigate professional or corporate trustees to safeguard your legacy.
Choosing Between a Single Trustee, Co-Trustees, or a Trust Protector
A single trustee who knows you and your beneficiaries understands potential conflicts that could arise and can hold to your wishes during disagreements among your heirs. Yet they could face legal action or removal from disgruntled beneficiaries. By choosing co-trustees, such as a family member and a professional trust manager, your trust benefits from both your values and the knowledge of trained administrators.
You could also assign a trust protector who has the authority to remove or replace a trustee for matters of incapacity or mismanagement. A trust protector can mediate disputes and modify the trust terms to accommodate changes in trust or tax law.
Planning for Successor Trustees
Choosing a successor trustee is much like selecting your primary one. They should have the same qualities as the first trustee, and will take over the role if the first trustee can’t or won’t perform the task. If you have a revocable trust where you are the trustee during your lifetime, you’ll need to name a successor trustee who will take over when you pass away.
Common Mistakes to Avoid When Choosing a Trustee
Your trustee must be able to put the trust’s interests ahead of their own, especially when they are also a beneficiary. It is important that you trust them to avoid any hint of impropriety, favoritism, or misconduct, and enlist professional guidance to manage the trust’s affairs. Avoid these mistakes when choosing a trustee:
- Don’t choose someone who is likely to cause conflict.
- Avoid someone who is disorganized.
- Avoid people who make poor financial choices.
- Don’t name a trustee without discussing it with them to be sure they’ll accept.
When you create an irrevocable trust, you are naming a trustee possibly many years before they’ll ever need to serve. You must choose someone who will recognize their duties and be ready to perform when called.
Legal Considerations in Massachusetts
Under Part II, Title II, Chapter 190B, Article I, Section 1-201, the legal requirements for a trustee are that they must be at least 18 years old and of sound mind. Beyond that, your trustee should abide by the Massachusetts Uniform Trust Code (MUTC), Chapter 203E, requiring them to make prudent investments and remain loyal to the trust terms. If they fail to do so, they risk legal action against themselves and the trust.
Schedule a Free Consultation With an Experienced Trust Attorney
Preparing to hand down your legacy requires careful review of not only your assets, but also who you will entrust to administer them. To learn more about these and other trust considerations, contact us today to arrange a free consultation with a qualified and knowledgeable trust attorney at Cohen Cleary, P.C.
