Individual Trustees

Individual trustees – good intentions with unintended consequences

The appointment of a trustee is a critical step in the estate planning process. Trusts require that one or more trustees be appointed to administer the trust. Over the last decade, individuals have been naming Uncle Bob or Aunt Sue rather than a corporate trustee. Any trustee must fulfill their duties and responsibilities which most often include these 6 items:

  1. investment of trust assets;
  2. distribution of income;
  3. distribution of trust principal when appropriate;
  4. accounting and record keeping;
  5. timely reporting to beneficiaries;
  6. and the exercise of independent and unbiased judgment.

Fear of injuring someone’s feelings, or the belief that the appointment is an honor, too often pervade the selection process. Unfortunately, the role of trustee is critical to the performance of trust per the intentions of your client. Below is broad overview of the duties of an individual or corporate trustee;

  1. Investment of trust assets – this duty can be delegated to a financial advisor under South Dakota trust statutes.
  2. Distribution of income/principal – not all beneficiaries need the same type of income financial advisor has the ability and tools to manage a trust income needs with a higher degree of certainty. Decisions when and how to distribute principal have legal and tax complications.
  3. Accounting and record keeping – trust reporting is legally different than performance reporting. WATC provides this service to ensure the beneficiaries have a transparency on trust operations.
  4. Timely reporting to beneficiaries – vacations, holidays or work are no excuses for reports not sent to beneficiaries. WATC ensures this aspect is done without the need of the financial advisor involvement.
  5. The exercise of independent and unbiased judgment – an individual has a harder time to be unemotional when dealing with an emotional issue such as money. WATC must follow the guidelines established in the trust document but the financial advisor can provide the family intricacies to WATC.

The selection of a trustee is an important decision which should begin with a thorough understanding of the significant duties, responsibilities, and liabilities placed on the trustee. WATC can provide continuity for the advisor and the advisor’s trust client to ensure compliance.

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