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When You Establish A Trust, Here's What You Should Know About Choosing A Trustee

WHOM TO CHOOSE AS TRUSTEE AND HOW TO CHOOSE A TRUSTEE

WHOM TO CHOOSE AS TRUSTEE AND HOW TO CHOOSE A TRUSTEE

 

When you are separated or getting divorced, dependent on your circumstances, you many need to create a trust. If you establish a lifetime trust or a trust in your will, you must choose a trustee to be responsible for making sure the directions contained in your document are carried out. A trustee is a fiduciary, and you may choose any person over the age of 18 your want to be the trustee of your trust. In some instances, you can choose yourself as the trustee, but in others, you can not choose yourself and you no longer have a spouse to choose.

Generally speaking, you should not choose your attorney or cpa as trustee because of potential conflicts of interest; however, in some instances, after appropriate disclosure, your lawyer may be the best person to act.

 

If you do now want to appoint a person as trustee, you may choose a corporate trustee which is licensed in the state where you live. Corporate trustees include bank trust departments, independent trust companies, and stock brokerage houses. In choosing corporate trustees, you should receive disclosure as to whether or not the trustee is also making money by holding or investing your assets.

 

No matter whom you choose, you should always have an "alternate" trustee so that if the trustee fails or refuses to act, or if the trustee is removed for any reason, there is someone (or some licensed corporation) ready to act. Your documents should include ways in which the trustee can be removed if he, she, or it does not perform appropriately.

 

Another important issue is bonding – i. e., if your money is taken or misappropriated by the trustee, the bonding company replaces your loss up to the face amount of the bond.

 

Despite this potential, many trusts contain language to the effect that the trustee is to serve without bond. This could be a problem if you choose an individual to act and he or his office manager takes your money and runs. Without a bond, you have lost everything. A bond can be purchased for an annual premium and must be renewed each year. You need to make sure that the trustee pays the premium each year.

 

If you choose a corporate trustee and your money is taken by dishonest employees, then you should be able to get your money back. So if you deal with a corporate trustee, make sure you understand the bonding protection. And get it in writing.

 

You should also look into and understand the fees that the trustee will charge. This is especially true when it comes to corporate trustees. Make sure the trustee’s fees are clearly set out. And be sure that the corporate trustee is not taking a fee to act as trustee and a fee to manage your money or property.

 

© 1997, Flying Solo. This information is general in nature and is not intended to be construed as legal advice. Because all situations are different, do not make any decisions until you have consulted with the legal professional of your choice.

 



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