Why Your Choice of Trustee Matters

One of the first documents added to an estate plan as it expands is a trust agreement. A trust can help you accomplish a wide range of estate planning goals and objectives; however, your trust will only be successful if you appoint the right Trustee. In fact, a Tucson trust attorney at Morris Hall PLLC explains how choosing the wrong Trustee can cause your trust to fail.

Trust Basics

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.

Trustee Responsibilities and Duties

A Settlor may appoint anyone he/she wishes as the Trustee. That Trustee has a fiduciary duty to the trust itself and to the beneficiaries named in the trust. As such, the Trustee must treat the trust assets with more care and invest with more caution than he/she would with his/her own assets. In addition, a Trustee is legally required to follow all the terms of the trust agreement unless a term is impossible, illegal, or unconscionable.  A Trustee has an enormous amount of power over the assets held in a trust as well as considerable authority over how and when they are distributed to the trust beneficiaries.

Choosing the Right Trustee Is Crucial

Given the important role a Trustee plays in the administration of a trust, and the power a Trustee has over the trust assets, it should come as no surprise that there are numerous things a Trustee could do to damage the trust and/or cause the trust to fail, such as:

• Not following the trust terms. Unless a term is illegal, impossible, or unconscionable, the Trustee is legally obligated to follow the terms as created by the Settlor. Failing or refusing to abide by the terms of the trust will almost certainly thwart the trust purpose as stated by the Settlor of the trust.
• Mismanaging the trust assets. A Trustee is in a fiduciary position, meaning that the Trustee must handle the trust assets with the utmost care. When investing trust assets, the “prudent investor standard” must be used by a Trustee. The prudent investor standard requires the Trustee to only invest in risk-averse options and to consider retention of the principal to be the most important consideration when making investments. If a Trustee is careless with the trust assets, the trust value could actually decrease instead of increase which clearly damages the trust.
• Engaging in self-dealing. “Self-dealing” by a Trustee can do enormous damage to a trust. Self-dealing basically means that the Trustee cannot manage the trust assets or invest those assets with the intention, or goal, of benefiting himself/herself. This is not to say that a Trustee can never benefit from a trust. In fact, sometimes a Trustee is also a beneficiary of a trust; however, the Trustee cannot make decisions with his/her own self-interest at the heart of those decisions.
• Creating a conflict of interest. In the event that a conflict of interest arises between the Trustee and the trust purpose, the trust terms or the beneficiaries of the trust could be irreversibly damaged.

Contact a Tucson Trust Attorney

For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about choosing the right Trustee for your trust, contact an experienced Tucson trust attorney at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.