Myth #1. Only professional trustees (such as banks and other financial institutions) can receive compensation for their work. A trustee is entitled to reasonable compensation under most states’ laws. A trust can include a provision allowing a trustee to receive compensation. Both professional and layperson trustees are entitled to compensation; however, the type of trustee may play a role in how much compensation the trustee receives. A professional trustee will usually provide their company’s fee schedule, and, unless the rate has been stated in the trust agreement, a layperson will likely determine their fee based on several factors, such as the time spent doing trust tasks, the degree of difficulty in handling trust matters, the level of risk assumed in carrying out responsibilities, and the trustee’s level of expertise.
Question #1. What important qualities should my trustee have to be successful in the role? Serving as a trustee is an important and often time-consuming responsibility. However, a trustee does not need to possess expertise in every area of trust administration to be successful. A trustee does need to be able to ask for help when needed. They should be able to seek assistance from and consult with financial advisors, tax preparers, and attorneys to fully carry out their responsibilities. The trust can even pay the fees for these professionals. But a trustee needs to know when they need help and be willing to go out and find that help. It is important that the trustee be detail oriented. The trustee will be asked to compile a list of everything the trust owns and keep accurate records of income and expenses. Being organized can also help ensure a smooth trust administration. Depending on what the trust owns, the number of beneficiaries, and the trust distribution plan, there may be a lot of moving parts. In addition to managing the trust, the trustee will need to make sure that they do not mix their personal finances or personal affairs with those of the trust. A trustee must also have good communication skills.It is important that the trustee clearly communicate with beneficiaries and be available to answer any questions that the beneficiaries have in a timely manner. Similarly, a trustee must be able to get along with the beneficiaries. Lastly, a trustee must follow rules. State and federal laws, as well as instructions within the trust, must be followed. Failing to comply with the rules can subject the trustee to potential civil and criminal penalties.
Question #2. Can I choose more than one trustee? The number of trustees you select is up to you. You may decide that you want two trustees to act together at the same time. If you choose to have two trustees act at the same time, you must make sure that they get along. You must also decide whether one trustee will be allowed to act without the other or if they must both be present when handling trust business. Keep in mind that the latter requirement may slow down the pace of the trust administration. It is also important for there to be a way to resolve any issues that the trustees do not agree on. Alternatively, you may decide that you only want one trustee to serve at a time. In this situation, you need a list of successors—that is, people who will step up if your chosen trustee is unable to fulfill their duties.