Considerations for Choosing the Right Trustee

Choosing the right successor trustee is one of the most important decisions you’ll make when you create your living trust. Your trustee will manage assets, pay expenses, communicate with beneficiaries, and ultimately distribute your estate according to your wishes. While many people default to naming a friend or family member, there are circumstances in which a professional fiduciary may be a better choice. Below, we explore common scenarios for each option and offer best‑practice guidelines to help you decide.

When a Friend or Family Member Makes Sense

1. Small or Straightforward Estates
If your trust holds relatively modest assets—perhaps a home, modest investment accounts, and personal property—and your family relationships are harmonious, a trusted loved one may be well equipped to serve. A friend or relative who knows your family dynamics can often communicate more personally with beneficiaries and may take on the role out of love and loyalty rather than for compensation.

2. Strong Financial Acumen and Availability
Choose a friend or family member who:

• Demonstrates solid organizational skills and basic financial literacy.

• Lives locally or is comfortable traveling to handle real‑estate and other in-person matters.

• Has the time and emotional bandwidth to act impartially, even during family tensions.

3. Low Conflict Potential
When your beneficiaries are unlikely to dispute decisions—perhaps because your estate plan is straightforward or family members share your vision—an informal trustee can keep costs down and preserve a personal touch.

Pitfalls to Watch For

• Emotional Burden: Managing an estate can be stressful and time consuming. Even well‑intentioned family members may grow overwhelmed.

• Perceived Favoritism: Other beneficiaries may question whether the trustee is acting impartially.

• Lack of Expertise: Mistakes in valuation, tax filings, or trust accounting can be costly and lead to creditor or beneficiary challenges.

When to Consider a Professional Fiduciary

1. Complex or High‑Value Estates
If your assets include businesses, multiple real‑estate holdings, international investments, or significant charitable components, a seasoned professional fiduciary brings experience in asset management, tax compliance, and legal requirements.

2. Blended Families or Potential Disputes
Family tensions—divorced children, second marriages, or beneficiaries with special‑needs trusts—can heighten the risk of conflict. A corporate or independent professional trustee operates under a fiduciary duty to act impartially and can insulate family members from difficult decisions.

3. Incapacity or Out‑of‑Area Concerns
When you don’t trust family members to stay objective under stress, or you and your family live far apart, a professional fiduciary ensures continuity. Many firms offer 24/7 availability and standardized processes for notices, accountings, and distributions.

4. Trustee Compensation and Oversight
Professional trustees charge competitive fees—often a percentage of assets under management plus transaction costs—but those fees can pale in comparison to legal fees and lost asset value from trustee errors or beneficiary litigation.

Best Practices for Naming Your Successor Trustee

1. Tiered Approach: Name a trusted family member as primary trustee, with a professional fiduciary as co‑trustee or successor upon a triggering event (e.g., incapacity, death).

2. Clear Trust Provisions: Outline compensation, expense reimbursement, and a dispute‑resolution mechanism (mediation or arbitration) to manage expectations.

3. Regular Reviews: Revisit your choice of trustee every few years—particularly after major life events such as divorce, relocation, or the birth of grandchildren.

4. Open Communication: Discuss your selection with potential trustees in advance. Ensure they understand the duties and are willing to serve.

By carefully weighing the complexity of your estate, family dynamics, and the skills required, you can select a successor trustee who will honor your wishes, uphold fiduciary standards, and provide peace of mind for your loved ones.

Using A Professional Fiduciary

Estate planning is about choosing the right people to fill certain roles in your estate plan. It’s selecting decision makers and defining who they care for when you are unable to. For some, the estate plan and beneficiaries may be clear, but maybe it’s slim pickens trying to select someone to carry out the plan–the decision makers. Well, like anything else in life, you can usually find a professional to do the job. Enter: professional fiduciaries.

A fiduciary is a person who acts on behalf of another, like managing money or property. A fiduciary assumes a duty to act in good faith with care, candor, and loyalty in fulfilling their obligations. The trustee of a trust is an example of a fiduciary. The trustee is administering the terms of the trust, on behalf of the person who created the trust, for the benefit of the beneficiaries.

There are institutional fiduciaries, like a bank. And there are individual fiduciaries, who are bonded professionals in private practice. For flexibility and a personal touch, some may hire a private professional fiduciary. For long standing stability and managing large portfolios of assets, some may hire an institutional fiduciary. It depends on the circumstances and your priorities. Either way, you can meet and speak with a professional of your choice, and then nominate them in your estate planning documents.

Here are some circumstances when professional fiduciaries may be helpful.

Transplant

If you relocate to another part of the country, or to another country altogether, it may take some time to build a network of trusted friends and contacts. A professional fiduciary can help fill the role of financial decision maker when a personal contact or family member is not a practical possibility. If you end up finding someone you are more comfortable with, you can always amend your documents to update your list of decision makers. You do not need to delay creating an estate plan simply because you do not know enough people in town.

Specific Needs

If your loved ones require special attention–whether that be due to a medical condition, an addiction issue, issues related to means tested government benefits, or something entirely different–a professional fiduciary can assist navigate those delicate waters so that you do not have to place an ill equipped family member into the situation. A professional fiduciary will not be emotionally attached to your situation. They will have no problems setting boundaries with the beneficiary, or sticking to firm guidelines. It’s their job and they take it seriously. They will also ideally have familiarity and experience dealing with discrete issues with trust beneficiaries.

Multi generational

If an estate plan calls for long term care of beneficiaries–for example, a “dynasty” trust, or a trust set up for a very young beneficiary that will persist into that person’s adult life–then choosing a decision maker that can carry on their duties for decades may make a lot of sense. Institutional fiduciaries typically have the ability to outlive an individual serving that role, and can provide that continuity and consistency that may be required under the circumstances. Similarly, nominating a private professional fiduciary firm, that employs several fiduciaries, may allow for that same type of continuity over the course of years.

Your estate plan should not be dependent upon your personal network of contacts to provide you with an adequate decision maker. A professional fiduciary can fill a gap until a personal decision maker is available to you, and it can also provide you with options that a family member or close friend cannot provide.