Selecting Trustees and Executors

April, 2006

In the course of our estate planning work with clients, we will ask who the client wishes to designate as trustee of any trusts we are creating, and as executor (or “personal representative”) of his or her estate. These are the people (or entities) who will take legal title to, and control the property of the trust or estate until it is distributed. They are in a fiduciary capacity, which means that they can be held personally liable if they negligently or intentionally misuse the property entrusted to them.

Who should you choose? It depends on the available candidates, nature of the property to be held, and what the client wants to accomplish. A family member who is responsible and knowledgeable about business and legal matters can be a good choice, especially if the property is not substantial. If the fiduciary is given discretionary powers to distribute property among the beneficiaries; a family member may be the best judge of what objectives you had in mind when you created a trust, and whether a distribution would be in the best interests of each beneficiary, and of the other family members.

Banks and trust companies are in the business of performing trust services, of course, and can offer specialized training and experience that is extremely valuable in dealing with large investment portfolios, or difficult trust properties. Since they are not family members, they can act as an objective arbiter of family squabbles, or provide a “stiff backbone” if a beneficiary is likely to make inappropriate demands for distributions. In many cases, appointing a bank and one (or more) family members as co-trustees provides the advantages of both.

One further thought – When appointing individual fiduciaries, consider appointing a successor (or providing a mechanism for appointing one). An estate or trust without a fiduciary will have one appointed by any court having jurisdiction, but the court’s choice may not be the party you would have selected.