If you create any type of trust, but won't or can't serve as the trustee, you'll need to decide whom to appoint. Trustees have a lot of authority over the money and property in a trust, so you should always choose someone in whom you have great confidence. In the event the trustee proves unable to handle the responsibilities, you or the trust beneficiaries have the legal option to remove the trustee and seek to recover any damages caused by the trustee.
You May Want to Appoint Joint and Alternative Trustees
Sometimes appointing just one person as trustee can be risky. At some point, the trustee may be unable to manage the trust because of a medical issue, lack of time, or any other reason. Appointing more than one trustee to serve as joint trustees can increase the likelihood that someone you've chosen will be serving as trustee. However, joint trustees must be in agreement on all decisions affecting the trust. This can sometimes create more problems than it solves. Therefore, you may want to provide for alternative trustees who can succeed a former trustee instead.
Trustees Should Be Comfortable With Numbers
Trustees have a large number of responsibilities, many of which require some general accounting skills. Depending on the amount and type of assets you put into the trust, your trustee may need to correspond with financial institutions, keep track of all income and losses from investments, prepare periodic financial reports for beneficiaries, file tax returns, and distribute money to beneficiaries. Many people who create trusts choose a lawyer or a professional organization to serve as trustee.
Your Trustee Must Manage the Trust for the Benefit of Beneficiaries
State laws prevent a trustee from administering a trust in a way that doesn't serve the best interests of the beneficiaries. Trustees who fail to exercise beneficiary loyalty in every decision they make can be subject to adverse legal consequences. For example, a trustee who stands to gain more from a trust transaction than the beneficiaries do is in breach of the duty of loyalty - and can be financially liable.
Beneficiaries Can Have a Trustee Removed
Trust beneficiaries can always ask a state court judge to remove a trustee if they feel that the trust isn't being handled properly. A trustee can be removed for many reasons, such as lacking the skill to handle trust transactions, failing to file tax returns or pay taxes that cost the trust money in penalties, or serving the interests of others who aren't trust beneficiaries.
A Trusts and Estate Lawyer Can Help
The law surrounding the responsibilities of trustees is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a trusts and estates lawyer.