A matter of trust: Choosing the right trustee

Amy Bracken
Head of Trust Advisor Services
Wells Fargo Wealth & Investment Management

If you are thinking about establishing a trust to help protect and preserve assets for future generations, here are some things to consider.

Understanding the trustee role

There are two main types of trustees: individual and corporate. An individual trustee is a person, either a professional such as a banker or lawyer, or, in many cases, a friend or family member. A corporate trustee is a trust company or financial institution with professionals specializing in performing the complex and difficult tasks a fiduciary is often called upon to perform.

The trustee is typically responsible for:

• Asset and investment management. The trustee holds legal title to all property within the trust. The trustee must follow the terms of the trust and applicable laws in managing those assets while considering the best interests of all current and future beneficiaries.
• Beneficiary distributions. The trustee must ensure any distributions made to beneficiaries are permitted by the terms of the trust and balance the needs of all beneficiaries.
• Recordkeeping. The trustee must keep detailed records of all trust activities, including investments and distribution decisions.
• Communication. The trustee must keep beneficiaries informed about the trust’s administration.
• Tax filings. The trustee must file any required tax returns, pay all necessary taxes, and ensure the beneficiaries receive any tax information related to their interests in the trust.

Serving as trustee is no small task and not everyone is well suited to the job, especially when it comes to significant, long-term trusts with multiple beneficiaries. The right trustee for your trust will depend on its size and complexity as well as on the skill set, resources, and experience of the trustee. Some people choose a mix of individual and corporate trustees to administer a trust (more on that below).

Individual trustee considerations

Simple trusts are often managed by a family member, friend, or legal professional who is willing to perform the necessary duties. However, as family wealth grows in size and complexity — such as when there are diverse assets worth many millions of dollars — overseeing a trust can often become quickly overwhelming for even the most willing individuals.

For example, many trusts can last a few years or continue for generations. During that time, the trustee is responsible for overseeing all aspects of the trust’s administration. This can mean months or years of intense and time-consuming work, even before the first distributions are made. If there are any hiccups along the way — improperly funded assets, murky trust language, bickering beneficiaries, or hidden tax liabilities — the trustee must resolve them and may be personally liable to the beneficiaries for their actions.

Corporate trustee considerations

For many larger or more complex trusts, having a corporate trustee provides some benefits. Corporate trustees are staffed with fiduciary professionals who possess specialized skills across a multitude of disciplines, from tax and estate planning to investment management. These professionals are trained to objectively interpret the terms of the trust and impartially manage its assets. Corporate trustees also provide a permanent fiduciary partner, ensuring consistent oversight of a family’s legacy for generations.

Know before you sign

You can also choose to designate both an individual and a corporate trustee to jointly oversee your trust. With this option, you will need to establish the role of each trustee — for example, the individual trustee might provide important insights on family dynamics, and the corporate trustee might handle the technical and legal aspects of trust administration. Many clients find that the combination of individual and corporate trustees provides a strong balance between understanding the family’s values and properly managing the trust and its assets.

In fact, before naming any trustee, be sure to:

• Consult with your estate planning attorney about factors that might affect your choice of trustee.
• If choosing an individual trustee, discuss the role and responsibilities with your choice of trustee before finalizing the paperwork to help ensure that person is up to the task.
• If choosing a corporate trustee, ensure the firm has the resources and expertise to fulfill the terms of the trust.
• Discuss the terms of the trust and your wishes with your trustee or trustees. Update them if anything changes.
• If your estate grows, reevaluate your trustee selection to help ensure they are still the best choice for the job. If you need to change trustees, your estate planning attorney can help guide you through the process.