Just Ask John
Who should I ask to serve as trustee of my trust?
There are many reasons for setting up a trust. The most common is to provide for the transfer of the property at the time of your death. In such cases, the trust takes the place of a will, which is why this kind of trust is often called a will-substitute.
People who use a trust as a will-substitute almost always retain the right to revoke or modify the trust at any time, for any reason. They also usually name themselves as the initial trustee.
And as trustee, they continue to manage trust property, just as they did it before setting up the trust. And they usually do so until dying or losing the mental capacity needed to serve as trustee. That’s when a successor, or replacement, trustee is needed.
The person who set up the trust normally identifies the successor trustee in the trust document, at the time of creating the trust. They can also give someone else the power to select a successor trustee when one is needed.
Regardless of who selected the successor trustee, a bank trust department tends to be an excellent choice when the trust is relatively large or involves complicated legal issues. A bank also makes sense when having a relative as trustee is likely to stir up controversy within the family, or when the trust is expected to last for many years after the creator of the trust has died.
There are many other potentially important considerations involved in selecting a successor trustee, but bank trust officers generally bring experience, competence and independence to the task.
Sometimes a family member can reasonably be expected to perform effectively as trustee or co-trustee. That may or may not save money.
People sometimes assume that only bank trustees charge fees. In fact, any trustee is entitled to a fee. Sometimes, however, family members agree in advance to waive a trustee fee.
Some people choose to make their trust irrevocable, even while they are still living. This is most commonly done with a goal of minimizing taxes or protecting assets from the claims of future creditors. In such cases, the trustee generally must be someone who is legally independent of the trust creator. Usually a bank or trusted family member, or a combination of the two, are asked to serve as trustee or co-trustees of such a trust.
The best choice is always whatever that trust creator wants after understanding the available options.
As always, I must add that this column does not contain legal advice, and that you should not rely on any of the above information to determine what is in your own best interest.
John Roth is the founder of Hawaii Trust & Estate Counsel, a statewide estate planning law firm with offices in Waimea, Hilo, Kona and Honolulu. He has taught the Estate Planning course at the Richardson School of Law in Honolulu, and various business law courses at the University of Hawaii—Hilo. He has resided in North Hawaii since 2008.