For part 1 of this series of posts, please click here.
Independent or Family/Beneficiaries as Trustees
Most advisors will agree on the pros and cons associated with naming independent trustees vs. placing family members or beneficiaries in the role of trustee. Let’s start with a quick recap of some of the more commonly discuss pros and cons:
•Generally more sophisticated in trust matters
•Generally more sophisticated in investments
•Generally less emotionally involved
•Potential “bad guy” for tough decisions
•May be more expensive
•Less natural interest in family matters
•Perhaps less flexible
•Connection/Mentoring Opportunities may be less
•Generally greater interest in beneficiaries
•Generally greater knowledge of trust creator’s values/intentions
•Highest interest in trust’s purposes
•May be more flexible
•May be less sophisticated/experienced
•Personal feelings/interests can impact decisions
•Position can impact familial relationships
- How important is it to me that the trust be continued?
- Is there a substantial risk of harm if my trust isn’t implemented as written?
- What impact would there be on my beneficiaries if they needed to interact with an independent trustee for access to trust benefits?
- Are there opportunities to increase my beneficiaries’ financial capabilities and competencies that might lead to a different decision?
- What would my beneficiaries want?
- If I am leaning towards appointing an independent trustee, is that because there are perceived financial or moral deficiencies in my beneficiaries that I don’t want to address head on?
- If I need a “bad guy,” why do I need a “bad guy?”
I recognize that the above discussion may be frustrating or unsatisfying to some — after all, I pose many questions and offer no answers. That’s likely a fair criticism. But the topic requires deep questions that are not generally asked and therefore decision-making regarding trustees is less informed than it could and should be.
What do you think? Are there other questions you would add to the list? Any important advantages and disadvantages missed above?
Posts in the Who Should Be Trustee? series are: