By Corrina Judd, Esq., Vice President & Estate Officer
If you've ever looked into estate planning, chances are you've heard something about trusts. A trust can be useful because it allows a person to create a rule book that governs how assets in the trust will be utilized and managed. The creator of the trust is often called the "grantor" of the trust, and the person who benefits from the trust property is called the "beneficiary." The grantor appoints a "trustee" of the trust, whose job is to follow the grantor's rule book and to manage the trust assets for the good of the beneficiary.
One of the most important choices facing a grantor is who to name as trustee. A trustee has a fiduciary responsibility to the beneficiaries of the trust, which means the trustee must always act in the best interests of the beneficiaries. A trusted individual or a corporate fiduciary may serve as the trustee, or the grantor themselves may elect to serve during their own lifetime so long as they remain mentally competent.
What should I consider in naming a trustee?
- Accountability. Any proposed trustee, whether an individual or professional, must be honest and trustworthy since trustees are accountable to the beneficiaries for their actions. Corporate trustees are held to a higher level of accountability than an individual trustee, and they have regulatory and audit controls in place to help prevent mis- use of funds and inappropriate actions.
- Interpersonal Dynamics. If strained family dynamics may be involved, particularly after the grantor passes away, the grantor should assess whether the trustee will need to navigate those challenges. If the trustee is a family member or friend, will that person be willing and able to manage interpersonal conflicts among the beneficiaries? Will the trustee find it difficult to say "no" to beneficiaries when distributions are inappropriate? Would naming a neutral, third party in the form of a corporate fiduciary be a better fit
- Administrative Skills. A trustee's fiduciary duties include administering a trust in accordance with the specific terms of the trust and with state law, balancing the beneficiaries' interests, and complying with reporting and tax filing requirements. Although an individual trustee may be unfamiliar with or overwhelmed by these responsibilities, professional fiduciaries like The National Bank of Indianapolis are equipped to provide expertise in the areas of tax, administration and fiduciary law.
- Asset Management. A trustee is responsible for investing the assets of the trust prudently. If the proposed trustee is an individual, does the person feel comfortable with investment duties? If the trust will contain any complex as- sets, like real estate or annuities, the grantor should consider whether those assets may be outside of the proposed trustee's area of expertise to manage. The National Bank of Indianapolis is adept at handling complicated assets within trusts and has the added benefit of in-house investment expertise in the form of Diamond Capital Management.
A trustee's responsibilities can quickly become complicated, and a grantor should consider the advantages of naming a sophisticated corporate fiduciary as trustee particularly if complex assets or delicate family dynamics are at play. We at The National Bank of Indianapolis consider it a privilege to administer trusts for our clients, and we would welcome the opportunity to serve you.