Chapter 28: Trustees
You Can Choose a Person or a Company to Get the Job Done

Let’s see. If you have a living trust you’ll probably name yourself trustee. But what about other kinds of trusts? Rockefellers and other millionaires probably have big institutions as trustees. The little guy in the top hat in the Monopoly game probably has them too. But what about you? If you have a trust, who should your trustee be?

If you have a will, and it leaves assets to a trust upon your death, the executor will transfer those assets to the trustee for distribution to the beneficiaries, or for continued management. While an executor’s duties can be onerous, at least they’re over within at most a few years. A trustee’s duties can continue for generations. And they require expertise in collecting estate assets, paying taxes, asset protection, investing money, paying bills, filing accountings (quarterly or annual) and managing money for beneficiaries.

There’s also a human side to the relationship. The trustee consults with your beneficiaries about the size of the checks issued periodically, what expenses will be paid, what withdrawals against principal will be permitted.

A trustee’s powers can vary greatly, depending on how your trust is worded. In general, it’s a good idea to give wide latitude to the trustee, because the economy changes so quickly. And because the law may limit what kinds of investments a trustee can make, you may have to spell out these powers in the trust agreement.

What if the Trustee Blunders?

A trust is a binding legal contract, so the trustee--whether a bank or a relative--has a legal obligation to follow your instructions and to manage the trust funds in a reasonable and prudent manner. If the trustee mismanages the funds, any beneficiary can demand an accounting of how the money in the trust has been spent. If any beneficiary doesn’t think the trustee acted reasonably, he or she can sue for reimbursement of any ill-gotten proceeds or improper losses, and have the trustee removed from that position. However, the beneficiary will have to show more than, say, that stocks the trustee bought lost money. The dissatisfied beneficiary has to show that investing in those stocks was unreasonable at the time.