Setting up a revocable living trust will require you to name a trustee. The trustee can be the creator of the trust (aka the settlor, trustor, or grantor) or the settlor can name someone else trustee. A beneficiary of the trust can be the trustee of the trust – this is very common with family trusts where a child of the settlor is a beneficiary and a trustee.
The trustee’s job is to manage the trust and must follow the terms of the trust. Some examples of terms of a trust are how the trustee must invest trust assets, how and when to distribute income and principal from the trust, and how and when to form separate trusts. Once the settlor dies, the trustee is responsible for paying taxes, paying debts, and distributing trust assets to beneficiaries.
The trustee can be an individual, an LLC, a corporation, or some other entity. The trustee is the settlor’s and beneficiary’s fiduciary and must act in their best interest.
Questions to consider when choosing your trustee:
- Is the person trustworthy?
- Is the person organized?
- Is the person financially responsible?
- Is the person fair and objective?
- Is the person capable of managing your assets?
- Does the person have integrity?
- Does the person get along with the beneficiaries?
- Does the person have any vices, such as, indulging in alcohol, drugs, or gambling?
You can name more than one trustee if you want co-trustees. However, it is usually simpler to name one trustee you trust to carry out your wishes rather than multiple trustees. Multiple trustees can create more complication. There will likely be more deliberation and the trustees will need to agree to make decisions. If trustees disagree and the trust is silent on how to resolve the disagreement, then a court may need to get involved to resolve the disagreement, which can be time-consuming and costly. Disagreement between trustees can also bring trust administration to a standstill.
When naming a trustee, also include successor trustees in case the trustee you name passes away or does not want to serve as trustee.