You have decided to establish trusts to accomplish your estate planning and now you need to decide who should serve as trustee. That is often the most difficult, and the single most important decision that needs to be made. You certainly have many choices. Beneficiary or non-beneficiary trustees? Family members, friends, or a corporate trustee? One trustee to serve alone or multiple trustees? There is not one right answer, as each choice has its own advantages and disadvantages.
What is a trustee? A trustee is some person or institution who holds property for the benefit of someone else. Before you choose who you wish to act as your trustee, it makes sense to know what a trustee has the responsibility to do and what duties he or she has.
A trustee has a duty of skill and care. This means the trustee will need to spend probably some significant amount of time to take care of the trust business. How much time that is depends on the purposes and terms of the trust. A trustee may be required to hire and consult with skilled professionals to help them carry out the trustee’s duties, which can include getting legal advice, tax planning and advice, investment advice, accounting assistance, etc.
A trustee also has a duty of loyalty, which means that the trustee’s personal interests cannot conflict with the beneficiaries’ interests. This may be a problem when a trustee is also a beneficiary. However, this problem can be alleviated somewhat by language in the trust itself.
A trustee has a duty to communicate with the beneficiaries. The Ohio Trust Code mandates certain communication – letting current and future beneficiaries know of the existence and terms of the trust, the identity and contact information for the trustee, what assets are in the trust, and the right to have a copy of the trust. The best practice is always to keep the beneficiaries informed.
There is also a duty of confidentiality. That means a trustee must keep certain information confidential. That may be confidentiality between the trustee and all of the beneficiaries, or between the trustee and one of the beneficiaries. There is certainly a balance that must be met between the duty to communicate and the duty of confidentiality. In selecting your trustee, consider who is best to put in a position to deal with these interests.
A trustee has a duty of impartiality, meaning the trustee must balance the interest of all interested beneficiaries, current and future.
Finally, the trustee has a duty not to delegate. In other words some duties should not be delegated, for example, acts involving the exercise of judgment and discretion. This duty does not prevent the trustee from obtaining the advice necessary to make such decisions. It just means that the decisions are ultimately the trustee’s.
The trustee also has duties regarding investment of the trust assets, tax reporting, etc., which should also be taken into account when choosing your trustee. It may not always be less expensive to have individuals serve as trustees rather than a corporate trustee. Choosing the correct trustee requires some serious thought and consideration, and you should discuss the advantages and disadvantages of your options with your attorney when making your choice.