Selecting the Trustee

One of the most important tasks when creating a trust is selecting the trustee. You can have the best trust ever written, but if the trustee doesn’t follow the trust agreement, or worse, if the trustee intentionally violates the terms of the trust, then you’ve failed. There is a saying that you should not let the fox in the hen house and that addage applies when selecting the trustee. See Antley v. Small, where a successor trustee tried to recover stolen trust funds by, among other actions, pursuing attorneys who were allegedly complicit in the fraud.

In C&S National Bank v. Haskins, a jury found that a corporate trustee was liable and surcharged it where it failed to meet and consult with co-trustees, causing a loss or value. The Georgia Supreme Court, reviewing “the extensive evidence and lengthy trial testimony [stated] we cannot say there was no evidence that CSNB breached its duty as corporate co-trustee causing a loss in value of the trust assets through failing to exercise the care and skill required.”

Factors that should be considered when selecting a trustee include the following:

• The purpose of the trust and whether the proposed trustee has the knowledge, skill and experience to promote and fulfill that purpose;
• Does the trustee agree with the purpose of the trustee and attempt to fulfill it’s purpose;
• Whether the trustee is familiar with the beneficiaries, their needs, and whether the trustee is likely to maintain sufficient contact to be aware of beneficiary needs;
• Does the trustee have time to serve (or will they make time);
• Do you trustee the trustee (would you hand him or her your checkbook);
• Cost (fees)
• Whether the trustee can be bonded (if desireable), or whether the trustee has sufficient assets to replace funds lost through negligence or malfeasence;
• If the trustee is an individual, will this negatively impact family relationships and, if so, whether a disinterested professional trustee would be better;
• Whether there is a loss of privacy if family members are in each other’s business;
• Especially with respect to spendthrift provisions, whether a disinterested professional trustee provides more protection against certain parties like ex-spouses.

Another factor is whether you want to burden the proposed trustee with the job. A trustee wears a bulls-eye on his or her back and many people don’t like or want the potential liability that goes with serving as trustee. It’s not uncommon for a trustee burdened with troublesome beneficiaries to seek a way out, through resignation or otherwise.