June 11, 2015
When setting up a trust, many estate owners believe they should choose a family member or trusted close associate as the trustee, assuming that person will make the best choices for their estate and its beneficiaries. In reality, many individuals don’t have the time or skills necessary to do the job effectively.
“Being a trustee is a time-consuming and complex task,” says Sally Mullen, Chief Fiduciary Officer for The Private Client Reserve. Trustees are charged with overseeing all administrative and legal tasks related to the trust, including filing tax returns if appropriate, dealing with court procedures, developing an investment strategy with consideration of the current and future needs of beneficiaries, ensuring statements are delivered to beneficiaries on a regular basis and accounting for all income and other investment earnings. It requires a lot of time and effort on the part of trustees and may push them beyond their capabilities.
This can be frustrating for the person put in that position, and it can compromise the value of the estate, she says. Mullen has seen many examples of families and friends inadvertently squandering a trust’s assets because they didn’t understand the long-term implications of their choices. For example, she recently had a client whose daughter secured power of attorney when the woman became incapacitated.