A trustee has the often unappreciated responsibility of managing assets for the benefit of others. If someone takes time to create a trust but then names someone irresponsible to serve as trustee, then all of their planning could go to waste when the trustee poorly manages assets, embezzles from the trust or allows their personal biases rather than trust documents to guide their biggest decisions.
One of the ways to avoid the potential pitfalls of naming the wrong trustee is to hire a professional trustee. Professional fiduciaries are useful for people in a number of circumstances, including the three scenarios below.
They want to leave a multi-generational legacy
If your legacy plans include leaving your house for your children and grandchildren to enjoy as a vacation property or creating a scholarship fund for a particular group of people or educational institution, you may hope for the trust to persist for multiple generations.
Rather than naming someone too young to have any proven financial or management experience as your trustee so that they can hold the role for as long as possible, you can hire a professional fiduciary. The responsibilities can pass from person to person as people retire or leave the business, allowing for the indefinite management of the trust.
They have a high-conflict family
Maybe you have one child who has always been responsible and another who has struggled with substance abuse. Naming your more successful child as trustee could strain the relationship between your children and possibly lead to a challenge in court later.
By naming a professional fiduciary instead of having someone within the family handle these responsibilities, you minimize the likelihood of angry family members filing lawsuits over your trust.
They have high-touch assets
If you want to fund a trust with property that will require careful and precise management, like a portfolio of rental properties occupied by individuals and maintained by a property management company, you need a trustee capable of handling all the complex legal and tax obligations that come with those assets. Professional fiduciaries have the education and experience to manage even complex property competently.
Considering your options for the trustee you must name when creating a trust can help you avoid common pitfalls.