Consider this scenario:
You own a small business. You’ve spent years building it into a profitable entity with substantial assets and goodwill you worked hard to achieve.
Now, as you grow older, you start to think: What will happen to all this when I’m gone? Do I want my business to carry on without me, or be dissolved and assets distributed to my family? Either way, who do I trust to skillfully carry out my wishes in my absence?
These are questions it’s never too soon to think about, especially when it comes to picking the person—your trustee—who will become the surrogate you select to get it all done.
So let’s think about it. Do you want the trustee of your estate to be a beloved family member? A close friend? Or an accomplished professional who does this for a living?
There are pros and cons to each, some obvious, others you may not have considered, which we discuss here along with other important issues.
The main thing is, planning your estate and choosing your trustee in advance can be a welcome source of peace of mind.
Contents |
| What does a trustee actually do? |
| What qualities should I look for in a trustee? |
| Which is best? Family member? Friend? Professional entity? |
| Other important trustee considerations |
Basically, whatever you stipulate in your trust agreement you want them to do, taking on a variety of tasks and responsibilities, such as:
Given what may be required of your trustee as detailed above, choosing the right one can be the most critical estate planning decision you make.
Here’s a list of qualifications to see if your candidates check the right boxes:
✅ Integrity The most essential quality of a trustee is built right into the word: trust. You want someone who is above all unswervingly trustworthy.
✅ Financial Knowhow Ideally, your trustee has a good grasp of business and finance, investments, taxes, accounting, and other monetary matters.
✅ Fiduciary Experience If they’ve worked as a trustee before, or in a similar role, say as an executor of a will, that can be a big plus.
✅ Specialized Knowledge If your situation is unique—for example, involving complex assets, a special needs beneficiary, real estate management, etc.—endeavor to find someone with that experience.
✅ Communication Skills Trustees must interact well with a variety of people, including beneficiaries, lawyers, financial advisors, and others.
✅ Impartiality Your trustee must be able to make business and family-related decisions without personal bias or conflicts of interest.
✅ Willingness and Availability Whoever you choose, be sure to spell out the full complexity, effort and long-term commitment required.
It’s a tough choice, and there’s no perfect answer. Let’s explore some of your options and the positives and negatives of each:
Keeping it in the family can be a comfort. You know and trust the loved one implicitly. They understand you and will work in your best interest. And if knowledgeable in business, finance and estate matters, it’s all the more reason to choose them. You’ll likely save on costs, too, especially if they elect to perform their duties without compensation.
The downside is, a lot more than integrity is required. Are they equipped to deal with complex financial issues, willing to spend months, even years settling your affairs, and steer clear of emotional biases that could cause conflicts with other family members? All worthy of consideration.
A close friend who is honest and trustworthy can perhaps bring more impartiality and less emotional involvement to the task than a family member, while still keenly understanding your family dynamics and the needs of your beneficiaries. Friends will often work gratis, too.
On the other hand, they may lack the financial, legal and managerial expertise needed for the role. If your friend is also a beneficiary, they may face conflicts of interest that make it difficult to be unbiased. And more so than family, friendships can fade over time or end in disagreement.
Hiring a carefully researched or highly recommended trustee service ensures a level of expertise, continuity and neutrality that makes for better business and financial decisions based on merit rather than bias. Benefits can far outweigh the extra cost by avoiding the mistakes, disputes and delays a busy family member or friend might incur.
In the minus column, professional trustees are more expensive, may lack family knowledge and empathy, take a more impersonal approach, and require assets be held in their custody, potentially limiting investment options available.
A cautionary Trustee TAleFamily Business magazine relates the story of George, a father of six who thought the ideal trustee for his business would be his daughter Sally, a lawyer, kindhearted, who regularly acted as family peacemaker. What could be better? Well, plenty, it seems. When George passed, Sally's relationship with her siblings soured. As trustee, she had to make tough, unpleasant decisions that often meant telling them “no.” Which just wasn’t in her DNA to do decisively. So she dithered in her decision-making. Settling the estate dragged on. Her siblings became increasingly frustrated and eventually lawyered up. Soon they were selling family heirlooms to pay their attorneys. The rancor grew and relationships were permanently scarred. Eventually, outside help was brought in to clean up the mess and the estate was settled. But at triple the time and triple the cost. Moral? Less experienced trustees can sometimes yield less than desirable results. So research thoroughly, weigh all possible outcomes, and choose your trustee wisely! |
Legal: A good estate-planning attorney will ensure the trust is properly structured and help you choose the right trustee for your specific needs.
Taxes: Have a plan in place that will minimize taxes so your survivors don’t get slammed. Consulting a tax expert now would be prudent.
Succession: In case your planned trustee isn’t available or no longer willing when the time comes, have a successor trustee in the wings.
Trustee Fees: Discuss with your selected trustee now the fees they will receive for their services and how they will be paid.
Family Dynamics: If your beneficiaries are family members, brief your future trustee on the best ways to approach potential family conflicts.
Choosing a reliable trustee to one day handle your business affairs is one of those things you intend to get around to…but unfortunately for some, they never do.
So it’s a good idea to at least start thinking about it. When you do, you’ll realize how important it is to take care of setting up your trust, and picking your trustee, sooner than later.
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