Say you’ve decided that you’d like to use one or more trusts to provide management, investment expertise, and perhaps tax savings.

The perfect trustee (if there were such a creature) – would have all of the following characteristics: competence, the ability to act without conflict of interest and in the best interests of the beneficiaries, an understanding of your objectives and knowledge of your beneficiary’s needs, knowledge of the subject matter of the trust, experience, availability and willingness to serve, and proximity to your beneficiary. Obviously no trustee will meet all these criteria. A good trustee will satisfy many or most of them.

COMPETENCE. A competent trustee should be able to understand the nature of his or her specific duties, select a course of action to take, recognize the limits of his or her knowledge and capabilities, and have the maturity to secure professional assistance where and when needed.

ABILITY TO ACT IN THE BEST INTERESTS OF THE BENEFICIARIES. To fulfill his or her fiduciary responsibilities, a trustee should make all decisions in the best interests of the beneficiaries. In addition to following the terms of the trust while maintaining impartial and absolute loyalty to the trust beneficiaries, the trustee must have the objectivity and fortitude to make difficult and, perhaps at times, unpopular decisions. For instance, a trustee must assess the beneficiary’s maturity and capability of running a family business, whether it is the type of business in which the beneficiary should invest, and what the effects of saying “no” will have on this beneficiary, and “yes” to the others.

UNDERSTADING OF YOUR GRANTOR’S OBJECTIVES AND KNOWLEDGE OF YOUR BENEFICIARIES’ NEEDS AND CIRCUMSTANCES. Before making any important decisions, the trustee must understand your priorities (as to which preference or whose interest should take precedence) and goals as well as the financial needs of the beneficiaries. The trustee must also be aware of any special needs of a beneficiary. For example, a child might be physically or mentally challenged and require special care and treatment. These considerations must be incorporated into the overall financial and trust planning.

KNOWLEDGE OF THE SUBJECT MATTER OF THE TRUST. An individual trustee may be able to manage the few periodic and routine administrative duties if most of the trust assets consist of mutual funds. If the bulk of the trust assets consist of listed securities, the trustee should work with, or have access to a good investment advisor. Alternatively, a bank or trust company with a competent investment department that can handle the trust assets more effectively should be considered as a trustee (or co-trustee). However, if the trust assets mainly consist of a family-owned business or a unique piece of real estate, it would be helpful if the trustee has experience working or dealing with the business or assets (or similar ones of its kind) in question.

EXPERIENCE. The job of a trustee is often difficult, time-consuming and multifaceted. It is wise to select someone who, because of background and experience, is familiar with the duties and responsibilities that he or she will be asked to undertake. Consider choosing professional trustees to act as sole trustees or, often better yet, as co‑trustees. These persons or entities could share the trusteeship with family members or long-time friends who might have a close and caring relationship to the beneficiaries, but who lack the background and experience (and perhaps time and inclination) to perform the important functions required of trustees without assistance.

AVAILABILITY AND WILLINGNESS TO SERVE. Not only are a trustee’s duties difficult and time-consuming, but they can often extend over long periods of time. Obviously, you are imposing a tremendous obligation when you appoint someone as a trustee to handle, supervise, and manage the trust assets for young beneficiary(ies).

PROXIMITY TO BENEFICIARY. Your sister in California might otherwise have been an excellent choice as trustee – except that your grandson (the trust beneficiary) lives in Florida and has ongoing needs that must be attended to on a regular basis. In this case, it might be more practical and beneficial to appoint someone locally, perhaps to serve with your sister as a co‑trustee, so that there is a co-trustee nearby to make sure that the beneficiary’s needs are met on a timely and regular basis.

CONCLUSION

It is exceptionally important to be aware of the characteristics of a good trustee and employ them as criteria in the trustee selection process. A wise choice will significantly enhance the probability that your objectives will be accomplished with the least costs and conflicts.