So, you’ve decided a Trust is the best way to protect your legacy. Congratulations! You’ve done the hard work of deciding what goes where. Now comes the part that feels a bit like casting a lead role in a high-stakes Broadway show: Choosing the Trustee.

 

This person (or institution) will hold the keys to the kingdom. They aren’t just a placeholder; they’re the manager, the referee, and occasionally the “bad guy.” Here’s a breakdown of your options, the pros and cons you might not have considered, and how to avoid a family dinner turning into a courtroom drama.

 

Option 1: The “Keep it in the Family” Choice (Spouse or Child)

It’s natural to want a loved one at the helm. They know you; they love you, and—let’s be honest—they’re usually the cheapest option.

 

Pros Cons
Deep Personal Knowledge: They know your values and what you would have wanted in a specific situation. Emotional Baggage: Family dynamics can make “impartiality” nearly impossible.
Cost-Effective: Most family members don’t charge high professional fees. The “Burden” Factor: It’s a second full-time job. Does your daughter want to spend her Saturdays reconciling bank statements?
Accessibility: They’re just a phone call away for the beneficiaries. Lack of Expertise: Managing a Trust requires understanding tax laws and investment strategies.

 

Pitfall to Avoid: The “Equalize Everything” Trap

Don’t name all three of your children as “Co-Trustees” just to avoid hurt feelings. If they can’t agree on where to go for Thanksgiving dinner, they definitely shouldn’t be forced to agree on a $500,000 investment strategy.

 

Questions to ask:

  • Can your trustee separate their “sibling” hat from their “fiduciary” hat?
  • If your spouse remarries, will their loyalty shift toward a new family?
  • Does the child you’re choosing have the “spine” to say “No” to a sibling requesting a reckless distribution?

 

Option 2: The “Trusted Advisor” (Attorney or Accountant)

You’ve worked with them for years. They know your books and your legal history. They seem like the “Goldilocks” choice—professional but personal.

 

The Reality Check

While they are experts in their field, being a CPA doesn’t automatically make them a good Trustee.

  • The Pro: They’re already “up to speed” on your finances.
  • The Con: They’re mortal. What happens if your attorney retires or passes away shortly after you do? Also, their hourly rate to pay a simple utility bill for a Trust property might make your eyes water.

 

Pitfall to Avoid: The “Missing Insurance” Gap

Individual professionals may not have “Fiduciary Liability Insurance.” If they make a massive mistake that isn’t covered by their standard malpractice insurance, your beneficiaries might be left holding an empty bag.

 

Option 3: The “Corporate Pro” (Bank or Trust Company)

Think of this as hiring a professional bodyguard for your money.

 

Pros Cons
Permanent Continuity: Banks don’t get sick, they don’t die, and they don’t move to Florida to “find themselves.” The “Cold” Factor: They follow the document to the letter. There is very little “wiggle room” for emotional circumstances.
Professional Expertise: They have dedicated departments for taxes, real estate, and investing. Cost: They charge a percentage of the assets annually.
Unbiased Referee: They don’t care about family feuds; they only care about the law. Minimums: Many banks won’t touch a trust unless it meets a certain dollar threshold (e.g., $1M+).

 

Pro-Tips for a Smoother Ride

  1. The Power of the “Trust Protector”

You can appoint a family member as a Trust Protector. This person doesn’t manage the money, but they have the power to fire a corporate trustee if they aren’t performing well. It’s the ultimate “safety switch.”

  1. Consider the “Co-Trustee” Setup

You can pair a family member (for the personal touch) with a corporate trustee (for the paperwork and expertise). This way, your son handles the family calls, and the bank handles the IRS.

  1. Ask the “What If” Questions
  • “What is your succession plan?” (Ask this of individual trustees).
  • “How do you handle disputes between beneficiaries?” (Ask this of corporate trustees).
  • “Are you willing to be the ‘bad guy’?” (Ask this of your children).

 

The Bottom Line

Choosing a trustee isn’t a reward for being the “favorite” child; it’s a job description. Choose the person (or entity) based on their reliability, technical skill, and temperament, not just because they’re the oldest or have the most initials after their name.

 

 

Disclaimer:

This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors; all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investments at 1-888-777-0970 or email us at info@alhambrapartners.com.