The Benefits of Using a Professional Fiduciary or Trustee for your Trust
One of the most important decisions a person who is creating a trust can make is choosing the person or party to act as successor trustee. The trustee of a trust often has significant discretion in managing the trust assets and has a fiduciary duty to the trust’s beneficiaries, meaning that he or she is expected to act solely in their best interests. For many people, their first thought when considering a potential trustee is choosing a close family member or one who has a background in law or finance. While using a family member as a trustee can work, there are many potential issues that may arise. For this reason, it is often advisable to use a professional trustee or fiduciary.
The Potential Issues with Naming a Family Member as Trustee
Naming a family member as the trustee of your trust can be attractive for a number of reasons. For one thing, family members tend to waive or refuse trustee fees, which can often be well into the thousands of dollars. Additionally, many people may choose a particular family member as trustee for emotional reasons and the fact that the trustee has a personal stake in the management of the trust. While these are valid reasons, there are some significant issues that can arise when a person chooses a family member as a trustee, even if that family member is an attorney or has specialized financial knowledge. These include the following:
- Inexperience – In many cases, even the most qualified of a person’s family members lack the experience required to adequately manage a trust. In these cases, the trustee often must seek professional help, a situation that could have been avoided by naming a professional fiduciary in the first place.
- Conflicts between family members – Family disputes have an interesting way of arising when money is at issue. Common examples of these issues include a trustee withholding trust assets due to concerns regarding beneficiary spending or beneficiaries allegations of favoritism.
- Greater risk for self-dealing – In some cases, a family member serving as trustee may feel that he or she is entitled to the trust assets, potentially creating a risk that the trustee may engage in self-dealing. If this situation were to occur, the ensuing litigation could spark a family feud that may last for generations.
There are significant benefits that accompany the decision to use a professional fiduciary or trustee, and the initial cost of using one often is more than offset by the avoidance of legal fees that are associated with nonprofessional trustees who require outside assistance or litigation that arises from a mismanaged trust.
Stability: Any institutional trustees exist in perpetuity, so there is no need to be concerned with establishing a successor trustee after the family member trustee passes away.
Regulation: Professional fiduciaries are regulated by various rules and regulations – for example, professional fiduciaries are state licensed and banks are regulated by both state and federal laws, while attorneys are bound by their professional code of ethics.
Experience: Professional fiduciaries and trustees will have the experience and acumen required to effectively manage the trust and ensure that assets are not subject to waste.
Free of controversy: Professional trustees are immune from any family dynamics that may cause significant conflicts regarding the way the trust is administered.
Contact a Southern California estate planning and litigation attorney today
Attorney Byron Husted is an experienced estate planning, probate and trust litigation attorney who works with clients throughout the counties of Los Angeles, San Bernardino, San Diego, and Riverside. To schedule a consultation, please call our office today at Tel: 619-826-8060 or send Mr. Husted an email at Byron@morrislawfirmapc.com.