A well-rounded estate plan will focus on achieving a number of inter-related goals and objectives. Not surprisingly, a variety of estate planning tools and strategies must be utilized to make a comprehensive estate plan successful. Among the most common additions to any estate plan is a trust. If you choose to include a trust in your estate plan, you will need to appoint a Trustee for your trust. You may be wondering if you can appoint yourself as the Trustee of your new trust. The living trust lawyers at Morris Hall PLLC explain when you can be your own Trustee and when you should appoint someone else.
What Is a Trust?
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor,” “Trustor,” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death, whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts. Because your Will can always be modified up to the point of your death, a testamentary trust is always revocable.
Trust Administration — Trustee Duties and Responsibilities
The Trustee of a trust is responsible for managing the trust assets as well administering the trust using the trust terms created by the Settlor. Among the numerous and varied duties and responsibilities of a Trustee are the following:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
When Can You Be Your Own Trustee?
The real question is when should you be your own Trustee, not when can you. The answer depends on the estate planning goal you hope to achieve using the trust. If death and incapacity planning is your goal, for example, you should be the Trustee of the revocable living trust you create. After naming yourself as the Trustee, you then name the person you would want to take over control of your assets in the event of your incapacity or death as the successor Trustee. Assets are then transferred into the trust. As the Trustee, you continue to have access to, and control over, those assets just as you did before creating the trust. If, however, you become incapacitated or pass away, your successor Trustee takes over as the Trustee. As the Trustee of the trust, your chosen successor now has control of the trust assets without the need to involve a court or do anything else. In this case, it is beneficial to be the Trustee of your own trust.
Conversely, if your goal is asset protection, naming yourself as Trustee of your own trust is counter-productive. When asset protection is the goal, an irrevocable living trust is used because assets transferred into an irrevocable living trust become the property of the trust once the transfer is complete. As such, the Settlor no longer has a legal interest in or control over the assets held in the trust, which means that the assets are not accessible by creditors of the Settlor, a spouse in a divorce, or others who might threaten the assets. This only works, however, if you are not the Trustee. As the Trustee, you would still have access to the asset held by the trust.
Contact Living Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about who to appoint as the Trustee of your trust, contact the experienced living trust attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.