The trustee plays an important role in ensuring a trust meets its objectives. When selecting a trustee, the creator of the trust must consider appointing either a personal confidant, relative, or professional with the necessary expertise to impartially manage the trust. An individual trustee may have intimate knowledge of beneficiaries but lack skills, while professional trustees have expertise but less personal connections. The ideal trustee can provide loyalty, expertise in legal, tax, and investment matters, and make impartial decisions for the lifetime of the trust.

1. Client Articles
Trustees – Selection, Roles, and Responsibilities
Description
The selection of a trustee is one of the most important elements of trust design. This article looks at the different
aspects of the role of the trustee and the factors you should consider when selecting one.
Synopsis:
The person selected as trustee of a trust may shape your intentions for years — or even decades — to come. The
trustee is responsible for keeping the trust’s financial blueprint on track in the face of random market events. He or
she is also expected to ensure that the trust continues to meet its objectives for beneficiaries, even those whose
goals and needs might evolve unpredictably over time. The ideal trustee will have — or be able to summon — legal,
tax, investment, and administrative expertise, and deliver that expertise loyally, decisively, and impartially.
Key Points
 The Ideal Trustee May Be a Jack or Jill of Many Trades
 Personal or Professional -- Weighing the Differences
 The Advantages of a Corporate Trustee
 The Costs of Trustees
 Points to Remember
By its very nature, a trust must work best just when its creator cannot act. Your trust may be carefully designed to
address all the concerns you can identify. But no matter how well you and your financial and legal advisors have
analyzed potential contingencies, the best-laid plans could be derailed by unforeseen circumstances. And perhaps
nowhere can a trust be more vulnerable than in its trustees.
Trustees may be at the fulcrum on the levers of change, striking a balance in the future that you might find
unfathomable today. Trustees are expected to keep the trust's financial blueprint on track in the face of random
market events. They are also expected to ensure that the trust continues to meet its objectives for beneficiaries,
even those beneficiaries whose goals and needs might evolve unpredictably over time. In addition, trustees
themselves might be buffeted by the winds of fate. Individuals might someday choose to relocate or change their
occupation. They might alter their lifestyles, retire, or otherwise become unable to fulfill the duties you have
envisioned. Your attention to sound trustee selection principles and self-correcting design features now can help
manage those future risks to your plans.
The Ideal Trustee May Be a Jack or Jill of Many Trades
The role of trustee may at any given time require legal, tax, investment, and administrative expertise, as well as
the wisdom to invoke that expertise when needed. The ideal trustee should also be able to deliver that expertise
loyally, decisively, and impartially.
As the creator of the trust, you have the broadest possible discretion in selecting someone to act as trustee. You
can opt for a personal confidant or relative in whom you have strong faith, such as a business associate, sibling, or
spouse. You can select a professional practitioner whose skills might be especially useful to your purposes, such as
a lawyer or accountant. Or you can designate a bank or trust company to act as a corporate trustee. Each option
presents a unique balance of benefits and concerns.

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Trustees
Personal or Professional -- Weighing the Differences
A personal confidant or relative may already have a well-established relationship with your intended beneficiaries
and a detailed knowledge of the unique circumstances in your bequest. That familiarity can provide the context
needed to interpret your wishes in your absence most effectively. It can also lay the groundwork for a strong long-
term relationship between the trustee and the beneficiaries. However, someone chosen solely on the strength of
personal relationships and intimate knowledge may lack the training or skills needed to act impartially in the face of
duress or emotional entanglement. What's more, a friend or relative acting as a trustee might have a conflict of
interest or be unable to devote sufficient time to the duties of trusteeship, and these potential deficiencies may not
become readily apparent for some time.
A professional practitioner who has had significant involvement in your family's affairs may offer many of the same
advantages as a personal associate, such as personal relationships with beneficiaries and historical knowledge of
unusual situations and special needs. They may also have the professional distance needed to remain dispassionate
under difficult circumstances. However, like a lay trustee, an individual professional's tenure may be subject to the
vicissitudes of his or her life and may ultimately be unavailable at some critical future juncture.
The Advantages of a Corporate Trustee
A bank acting as a corporate trustee can provide a high level of impartiality and detachment as well as ready access
to specialized technical, tax, and legal expertise. A corporate trustee can also offer a high level of continuity and
stability, since its ability to serve is generally not dependent upon any single individual. However, a bank cannot
maintain the same level of intimate knowledge as a family insider about your intentions or your beneficiaries'
needs.
You should keep in mind that different types of trustees may be subject to different rules, insurance, and licensing
requirements. Lawyers, for example, must meet the terms of their state bar association licenses when they act as
trustees. Banks may be subject to regulatory audits and documentation procedures. Also, professional trustees are
often held to the highest fiduciary standards under the "prudent investor" principle. Simply put, that means that
trust assets would have to be managed according to the best practices of the asset management profession, with
special attention to appropriate risk management and diversification.
Trusts created in the Colonial era still function today, even as the laws governing trust and inheritance change
almost daily. Whether your goal is ensuring your family's fiscal stability or creating a permanent legacy, a properly
crafted trust can be a powerful tool.
The Costs of Trustees
Each trust involves many unique considerations, so broad generalizations about annual fees and one-
time costs may not be meaningful in relation to any specific trustee arrangement. The basic yearly
trustee fee may be expressed as a percentage of the assets in the trust. Each state has its own rules
governing the maximum fee that a trustee can charge and the precise range of services that the fee
might cover. In addition, many legal, accounting, custody, and investment management fees may
sometimes be billed separately, even if the individual or organization serving as trustee also performs
those services.

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Trustees
Points to Remember
1. The ultimate success of your trust's mission will depend in large part on how your trustee carries out your
intentions, making the selection of a trustee one of the most important elements of trust design.
2. The ideal trustee should possess or have ready access to legal, tax, investment, and administrative
expertise, as well as the wisdom to invoke that expertise when needed. The ideal trustee should also be
able to deliver that expertise loyally, decisively, and impartially.
3. Personal confidants, relatives, lawyers, accountants, and banks are all commonly used as trustees. Family
members, friends, and business associates are often the most knowledgeable about your intentions and
your beneficiaries' needs, but may have less than optimal skills or temperament for the job. Professionals
may offer a stronger skill set but can lack important personal connections to your family. Professionals may
also be held to a higher standard of performance than lay trustees by probate judges and executors.
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April 2012 — This column is provided through the Financial Planning Association, the membership organization for
the financial planning community, and is brought to you by Larry R Frank Sr., MBA, CFP®, a local member of FPA.
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